UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


SCHOOL  OF  LAW 
LIBRARY 


,4. 


A  TREATISE 


ON  THE 


LAW  OF  PARTNERSHIP. 


From  the  Fifth  English  Edition. 


BY 


THE  RIGHT  HONOURABLE 

SIR  NATHANIEL  LINDLEY,  Knt. 

ONE  OF  THE  LORDS  JUSTICES  OF  HER  MAJESTY'S  COURT  OF  APPEAL. 
ASSISTED  BY 

WILLIAM  C.  GULL,  M.A., 

OF  LINCOLN'S  INN,   ESQ.,   BARRISTER-AT-LAW, 
VINERIAN  SCHOLAR  IN  THE  UNIVERSITY  OF  OXFORD,  1883. 


WALTER  B.  LINDLEY,  M.A., 

OF  LINCOLN'S  INN,   ESQ.,  BARKISTER-AT-LAW. 

WITH  AMERICAN  NOTES 
BY 

CHAS.  Y.  AUDENRIED. 
VOL.  II. 

NEW  YORK  AND  ALBANY 

BANKS  &  BROTHERS,    LAW  PUBLISHERS 

1891 


J 
r 


Entered  according  to  the  Acts  of  Congress,  in  the  year  1888,  by  the  Black- 
stone  Publishing  Company,  in  the  office  of  the  Librarian  of 
Congress,  at  Washington,  D.  C. 


6^  5 


*BOOK  III.  [*3011 


OF  THE  RIGHTS  AND  OBLIGATIONS  OF  MEM- 
BERS OF  PARTNERSHIPS  BETWEEN  THEM- 
SELVES. 


CHAPTER  I. 


OF  THE  RIGHT  TO  TAKE  PAET  IN  THE  MANAGEMENT 
OF  THE  AFFAIRS  OF  THE  FIRM. 

In  partnerships,  the   good   faith   of  the  partners  is  j>j-  jjj 
pledged  mutually  to  each  other  that  the  business  shall  Chap.  1. 
be  conducted  with  their   actual  personal  interposition,  Each  member 
so  that  each  may  see  that  the  other  is  carrying  it  on  for  of  partner- 
their  mutual  advantage  (a).  Sakfpa^ 

In  the  absence  of  an  express  agreement  to  the  con-  jn  its 
trary,  the  powers  of  the  members  of  a  partnership  are  manage- 
equal,  even  although  their  shares  may  be  unequal;  and  meut- 
there  is  no  right  on  the  part  of  one  or  more  to  exclude 
another  from  an  equal  management  in  the  concern  (b). 
Moreover,  if  two  persons  are  in  partnership,  and  one 
of  them  mortgages  all  his  share  and  interest  therein  to 
the  other,  the  latter  will  not  be  permitted,  during  the 
continuance  of  the  partnership,  to  avail  himself  of  his 
rights  as  a  mortgagee  and  to  exclude  his  co-partner 
from  interference  in  the  partnership  (c).  Indeed, 
speaking  generally,  it  may  be  said  that  nothing  is  con- 
sidered as  so  loudly  calling  for  the  interference  of  the 
Court  between  partners,  as  the  improper  exclusion  of 
one  of  them  by  the  others  from  taking  part  in  the  man- 
agement of  the  partnership  business  (d). 


(a)  Per  Lord  Eldon  in  Peacock  v.  Peacock,  16  Ves.  51. 

(b)  Rowe  v.  Wood,  2  Jac.  &  W.  558;  see,  too,  Lloyd  v.  Loarino;, 
6  Ves.  777. 

(c)  Rowe  v.  Wood,  2  Jac.  &  W.  558. 

(d)  See,  in  addition  to  the  cases  last  cited,  Goodman  v.  Whit- 
comb,  1  Jac.  &  W.  589;  Marshall  v.  Colman,  2  ib.  266. 

(373) 


374  RIGHTS  OF  PARTNERS  INTER  SE. 

[  *302]  *  It  need,  however,  hardly  be  observed  that  it  is  per- 

Bk.  III.  fectly  competent  for  partners  to  agree  that  the  inanage- 

Chap.  1.  ^  inent  of  the  partnership  affairs  shall  be  confided  to  one 
Unless  other-  or  more  of  their  number  exclusively  of  the  others;  and 
wise  agreed,  that  where  snch  an  agreement  is  entered  into,  it  is  not 
competent  for  those  who  have  agreed  to  take  no  part  in 
the  management,  to  transact  the  partnership  business 
without  the  consent  of  all  the  other  partners.  But,  as 
was  seen  in  an  earlier  part  of  the  treatise,  every  mem- 
ber of  an  ordinary  firm  is  prima  facie  its  agent  for  car- 
rying on  its  business  in  the  usual  way  (e);  and  persons 
dealing  with  a  partner  within  the  limits  of  his  apparent 
authority,  are  entitled  to  hold  the  firm  answerable  for 
his  conduct,  unless  such  persons  had  distinct  notice  that 
his  real  authority  was  less  extensive  than  they  had  a 
right  to  assume  it  to  be. 

(e)  Ante,  book  ii.  ch.  I. 


DUTY  TO  OBSERVE  GOOD  FAITH.  375 


*  CHAPTER  II.  [*303] 


OF  THE  GENERAL  DUTY  OF   PARTNERS   TO   OBSERVE 
GOOD  FAITH. 


Section  I. — Preliminary  Remarks. 


In  societatis  contractibus  fides  exuberet  (a).     The  nt-  Ek.  III. 
most  good  faith  is  due  from  every  member  of  a  part-  Chap.  2  Sect. 

nership  towards  every  other  member;  and  if  any  dis- 

pute  arise  between  partners   touching  any  transaction  High  stand- 
by which  one  seeks  to  benefit  himself  at  the  expense  of  ard  of 
the  firm,  he  will  be  required  to  show,  not  only  that  he  nouo.ur  re~ 
has  law  on  his  side,  but  that  his  conduct  will  bear  to  be  amon(r 
tried  by  the  highest  standard  of  honour  (6).      Thus,  if  partners, 
one  partner  knows  more  about  the  state  of  the  partner- 
ship  accounts  than  another,  and  concealing  what  he 
knows,  enters  into  an  agreement  with  that  other,  rela- 
tive to  some  matter  as  to  which  a  knowledge  of  the  state 
of  the  accounts  is  material,  such  agreement  will  not  be 
allowed  to  stand  (c).1 

This  obligation  to  perfect  fairness  and  good  faith,  is,  and  among 
moreover,  not   confined    to  persons   who  actually  are  those  about 
partners.     It  extends  to  persons  negotiating  for  a  part-  to  become 
nership,  but  between   whom  no  partnership  as  yet  ex-      r  ners' 
ists  (d);2  and  also  to  persons  who  have  dissolved  part-  and  among 

(a)  Cod.  iv.  tit.  37,  1.  3. 

(6)  See  Blisset  v.  Daniel,  10  Ha.  522,  536.  Compare  Cassels  v. 
Stewart,  6  App.  Ca.  64,  noticed  infra,  which  shows  how  difficult 
it  is  to  apply  this  general  principle. 

(c)  See  Maddeford  v.  Austwick,  1  Sim.  89. 

(d)  See  Hichensu.  Congreve,  1  R.  &  M.  150;  Fawcett  v.  White- 
house,  ib.  132. 

1  See  Brigham  v.  Dana,  29  Vt.  1  (1856);  Sexton  v.  Sexton,  9 
Gratt,  204  (1852);  Nicholson  v.  Janeway,  16  N.  J.  Eq.  285 
(1863). 

2  If  A.  and  B.  negotiate  with  each  other  for  the  formation  of 
a  business  firm,  they  are  at  liberty  each  to  drive  as  advantage- 
ous a  bargain  for  himself  as  he  can.  Uhler  v.  Semple,  20  N.  J. 
Eq.  288  (1869);  but  neither,  when  he  negotiates  with  strangers 
on  behalf  of  the  proposed  firm,  can  enter  into  any  collateral  agree- 
ment for  his  own  private  benefit.  Densmore  Oil  Co.  v.  Deusmore, 
64  Pa.  St.  43  (1870.) 


37G 


DUTY  TO  OBSERVE  GOOD  FAITH. 


Bk.  III. 
Chap.  2.  Sect, 
1. 

[*304] 

those  who 
have  ceased 
to  be  part- 
ners. 

Each  must 
do  his  duty. 


Principle  of 
good  faith 
the  basis  of 
the  internal 
law  of  part- 
nership. 


nership  but  who  have  not  completely  wound  up  and 
settled  the  partnership  affairs  (e);1  and  most  especially 
is  good  faith  required  to  be  observed  when  one  *partner 
is  endeavouring  to  get  rid  of  another,  or  to  buy  him 
out  (/). 

Notwithstanding  the  universal  application  to  partners 
of  the  rule  requiring  perfect  good  faith,  if  one  partner 
repudiates  the  contract  of  partnership  and  will  not  per- 
form his  duty  towards  his  co-partners,  he  cannot  justly 
complain  if  they  in  return  decline  to  treat  him  on  a 
footing  of  equality  with  themselves  (g).  As  observed 
by  Lord  Eldon  in  Const  v.  Harris:  "A  partner  who 
complains  that  the  other  partners  do  not  do  their  duty 
towards  him,  must  be  ready  at  all  times  and  offer  him- 
self to  do  his  duty  towards  them"  (h).2  But  if  a  part- 
ner has  been  set  at  defiance  by  his  co-partners;  if  they 
have  denied  that  he  is  a  partner,  and  that  he  has  any 
right  to  interfere  in  the  partnership,  they  can  derive 
no  advantage  from  the  circumstance  that  he  has  not 
performed  his  duty  to  them  (i). 

A  partner  whose  rights  are  denied  should  be  prompt 
in  asserting  them,  or  he  may  be  seriously  prejudiced. 
This  subject  will  be  further  adverted  to  in  that  part  of 
the  work  which  relates  to  the  defences  to  actions  be- 
tween partners  (k). 

The  foregoing  general  principles  may  be  regarded  as 
the  basis  of  the  law  of  partnership,  so  far  as  it  relates 
to  the  rights  and  obligations  of  partners  as  between 
themselves,  and  they  will  be  found  to  be  more  or  less 
illustrated  throughout  the  whole  of  the  present  book. 
Those  cases,  however,  which  more  especially  relate  to 
the  obligation  of  partners  not  to  benefit  themselves  at 
the  expense  of  their  co-partners,  and  to  the  rights  of 
majorities,  require  to  be  especially  noticed. 

(e)  See  Lees  v.  Laforest,  14  Beav.  250;  Clegg  v.  Fishwiek,  1 
Mac.  &  G.  294;  Perens  v.  Johnson,  3  Srn.  &  G.  419;  Clements  v. 
Hall,  2  De  G.  &  J.  173. 

(/)  Blisset  v.  Daniel,  10  Ha.  493;  Maddeford  v.  Austwick,  1 
Sim.  89;  Perens  v.  Johnson,  3  Sm.  &  G.  419;  Chandler  v.  Dorsett, 
Finch,  431.  As  to  withholding  information,  see  McLure  v.  Rip- 
ley, 2  Mac.  &  G.  274. 

(g)  See  McLure  v.  Ripley,  2  Mae.  &  G.  274;  Reilly  v.  Walsh, 
11  Ir.  Eq.  22. 

(h)  Turn.  &  R.  524. 

(t)  See  Dale  v.  Hamilton,  2  Ph.  276. 

(fc)  Infra,  ch.  10,  \  3. 

1  See  Betts  v.  June,  51  N.  Y.  274  (1872);  Warren  v.  Schain- 
wald.  62  Cal.  56  (1882);  Beam  v.  Macomber,  33  Mich.  127(1878); 
Jones  v.  Dexter,  130  Mass.  380  (1881). 

2  Rhea  v.  Tathem,  1  Jones  (N.  C.)  Eq.  290  (         ). 


BENEFIT  OBTAINED  BELONGS  TO  THE  FIRM.  3  i  * 

*  Section  IT. — Of  the  Obligation  of  Partners  not  to  [*305] 
Benefit  Themselves  at    the  Expense  of  their  Co- 
Partners. 

Good  faith  requires  that  a  partner  shall  not  obtain  a  Bk.  III. 
private  advantage  at  the   expense  of  the  firm.     He  is  Chap.  2.  Sect. 

bound  in  all  transactions  affecting  the  partnership,  to  J 

do  his  best  for  the  common  body,  and  to  share  with  his  No  partner 
co-partners  any  benefit  which  he  may  have  been  able  to  allowed  to 
obtain  from  other  people,  and  in  which  the  firm  is  in  sei"atthe 
honour  and  conscience  entitled  to  participate;  Semper  expense  of 
enim  non  id  quod  privatim  interest  unius  ex  sociis  ser-  firm. 
vari  solet,  sed  quod  societati  expedit  (I). 

There  are  two  modes  in  which,  more  especially,  part- 
ners attempt  unfairly  to  acquire  gain  at  the  expense  of 
their  co-partners,  viz.,  1,  by  directly  making  a  profit  out 
of  them;  and  2,  by  appropriating  to  themselves  benefits 
which  they  ought  to  have  acquired,  if  at  all,  for  the 
common  advantage  of  the  firm.  It  will  be  convenient 
to  advert  to  each  of  these  modes  in  turn. 

In  the  first  place,  then,  it  may  be  laid  down   as  a  j  Deriving 
general  rule,  that  one  partner  is  not  allowed  to  derive  profit  from 
profit  at  the  expense  of  the  firm  from  any  dealings  be-  dealings  with 
tween  him  and  the  partnership,   unless   it   is  clearly  m" 

agreed  that  he  is  to  have  such  profit.     For  example,  if  Sale  to  firm. 
a  partner  is  buying  or  selling  for  a  firm,  he  cannot  sell 
to  it  or  buy  from  it  at  a  profit  to  himself. 

In  Bentley  v.  Craven  (m),  one  of  the  several  part-  Bentley  v. 
ners  was  employed  to  purchase  goods  for  the  firm.  He,  Craven, 
unknown  to  his  co-partners,  supplied  them,  at  the 
market  price,  with  goods  previously  bought  by  him- 
self when  the  price  was  lower,  and  he  so  made  a  con- 
siderable profit.  But  it  was  held  that  the  transaction 
could  not  be  sustained,  and  that  he  was  accountable  to 
the  firm  for  the  profit  thus  made.  The  Master  of  the 
Rolls  in  delivering  judgment,  observed:  "The  case  is 
this, — Four  partners  established  a  partnership  for  re- 
fining sugar;  one  of  them  is  a  wholesale  grocer,  and 
from  his  business  is  peculiarly  cognizant  with  the  vari- 
ations in  the  sugar-market,  and  has  great  skill  in  buy- 
ing sugar  at  a  right  and  proper  time  for  the  business. 
Accordingly  the  business  of  selecting  and  ^purchasing  r  *  3061 
the  sugar  for  the  sugar  refinery  is  entrusted  to  him. 
He  being  the  person  to  buy,  it  is  his  duty  and  business 
to  employ  his  skill  in  buying  for  the  sugar  refinery  at 
the  time  he  thinks  most  beneficial.      Having  according 

(/)  Dig.  xvii.  tit.  2  pro  socio,  I.  65,  \  5. 
(}«)  18  Beav.  75. 


378 


DUTY  TO  OBSERVE  GOOD  FAITH. 


Bk.  III. 
Chap.  2.  Sect. 


Purchase 
from  firm. 
Dunne  v. 
English. 


Full  dis- 
closure 
necessary. 


Authority  to 
sell  at  a 
given  price 
no  waiver  of 
share  ot 
higher  price. 


to  his  skill  and  knowledge  bought  sugar  at  a  time  when 
he  thought  it  likely  to  rise,  and  it  having  risen,  arjd  the 
firm  being  in  want  of  some,  he  sells  his  own  sugars  to 
the  firm  without  letting  the  partners  know  that  it  was 
his  sugar  that  was  sold."  Being  the  agent  for  the  firm 
for  buying  sugars,  he  sold  his  own  sugars  to  the  firm 
and  made  a  profit,  and  the  firm  was  held  entitled  to 
that  profit  accordingly.1 

In  Dunne  v.  English  (n),  the  plaintiff  and  the  de- 
fendant had  agreed  to  buy  a  mine  for  50,000/.,  with  a 
view  to  re- sell  it  at  a  profit.  It  was  ultimately  arranged 
that  the  defendant  should  sell  it  to  certain  persons  for 
60,000/.,  and  that  the  profit  of  10,000/.  should  be 
equally  divided  between  the  plaintiff  and  the  defend- 
ant. The  defendant,  however,  in  fact  sold  the  mine  for 
much  more  than  60,000/.  to  a  company  in  which  he  him- 
self had  a  large  interest.  The  plaintiff  was  held  entitled 
to  one-half  of  the  whole  profit  made  by  the  re-sale. 

There  was  in  this  case  some  evidence  that  the  plain- 
tiff knew  that  the  defendant  had  some  interest  in  the 
purchase  beyond  his  share  of  the  known  profit  of  10,- 
000/.;  but  the  plaintiff  did  not  know  what  that  interest 
was,  and  the  real  truth  was  concealed  from  him.  It 
was  held  that  the  defendant  being  the  plaintiff's  part- 
ner, and  expressly  entrusted  with  the  conduct  of  the 
sale,  was  bound  fully  to  disclose  the  real  facts  to  the 
plaintiff,  and  not  having  done  so,  could  not  exclude  him 
from  his  share  of  the  profits  which  the  defendant  real- 
ised by  the  sale  (o). 

This  case  also  shows,  what  indeed  is  obvious  enough 
without  authority,  that  one  partner  who  authorises  an- 
other to  sell  partnership  property  at  a  given  price,  does 
not  thereby  deprive  himself  of  his  right  to  share  a 
higher  price  if  a  higher  price  should  be  realised  (p). 

(n)  18  Eq.  524. 

(o)  See,  also,  Imp.  Merc.  Credit  Assoc,  v.  Coleman,  L.  R.  6  H. 
L.  189. 

{p)  See,  also,  Parker  w.  McKenna,  10  Ch.  96,  and  De  Bussche 

1  If  A.,  a  member  of  the  firm  of  A.  &  B.,  secure  an  option  to 
purchase  a  property  and  afterwards  sell  it  to  his  firm  at  an  ad- 
vance, he  must  account  to  his  partner  for  his  profits;  so  if  he  re- 
ceive from  the  vendee  a  commission  for  negotiating  the  sale. 
Emery  v.  Parrott,  107  Mass.  95  (1871);  Grant  v.  Hardy,  33  Wis. 
668(1873);  Densmore  Oil  Co.  v.  Densmore,  64  Pa.  St.  43  (1870); 
and  if  A.  divide  his  commissions  with  C,  he  must  nevertheless 
account  for  the  whole  ot  them.  Graut  v.  Hardy,  33  Wis.  668 
(1873).  If  A.  enter  into  a  partnership  with  D.  to  carry  out 
the  transaction.  D.  knowing  of  A.'s  wrong-doing,  they  are 
both  jointly  and  severally  liable  to  account  to  B.  for  their  profits. 
Emery  v.  Parrott,  107  Mass.  95  (1871). 


BENEFIT  OBTAINED  BELONGS  TO  THE  FIRM.  379 

*  The  same  principles  apply  to  attempts  made  by  [  *  307] 
partners  to  secure  for  themselves  benefits  which  it  was  Bk.  III. 
their  duty  to   obtain,  if  at   all,  for  the   firm   to  which  Chap.  2.  Sect, 
they  belong  (q).  J 

Thus  in  Carter  v.  Horne(r),  the  plaintiff  and  the  de-  2.  Obtaining 
fendant  agreed  for  the  purchase  of  an  estate  in  moities  orients 
between  them.     The  estate  was  subject  to  several  in-  |!0nour 
cumbrances,  which  were  to  be  discharged  out  of  the  belong  to  the 
purchase  money.     The  defendant  had  abatements  made  firm, 
to  him  by  some  of  the  incumbrancers  of  several  sums  Carter  v. 
due  for  interest  and  otherwise,  which  they  in  consider-  Home, 
ation  of  services  and  friendship  agreed  should  be  to  his 
own  use.     However,  on  a  bill  brought  against  him  by 
his  co- purchaser  for  an  account  of  the  rents  and  profits, 
the  Court  would  not  allow  the  defendant  the  exclusive 
benefit  of  these  abatements,  but  held  that  he  must  ac- 
count' for  them  ;  the  purchase  being  made  for  the  equal 
benefit  of  both  parties,  and  on  a  mutual  trust  between 
them.1 

It  has  been  decided  more  than  once,  that  if  one  part-  Renewing 
ner  obtains  in  his  own  name,  either  during  the  part-  leases, 
nership  or  before  its  assets  have  been  sold,  a  renewal 
of  a  lease  of  the  partnership  property,  he  will  not  be 
allowed  to  treat  this  renewed  lease  as  his  own  and  as 
one  in  which  his  co-partners  have  no  interest.2     This  Clandestine 
was  laid  down  and  acted  on  by  Sir  Wm.  Grant  in  the  renewal, 
celebrated  case  of  Featherstonhaugh  v.   Femcick  (s),  Featherston- 
where  two  partners  having  obtained  in  their  own  names  £,aug  •  .£ 

v.  Alt,  8  Ch.  D.  286;  and  see  ib.  p.  317,  as  to  a  custom  authoris- 
ing such  a  practice. 

(q)  Parker  v.  Hills,  5  Jur.  N.  S.  809,  is  not  opposed  to  these 
cases,  for  there  the  money  was  paid  for  a  lease  which  was  held 
to  belong  to  one  partner  only. 

(r)  1  Eq.  Ab.  7.  See,  also,  De  Bussche  v.  Alt,  8  Ch.  D.  286  ; 
Morison  v.  Thompson,  L.  R.  9  Q.  B.  480,  as  to  the  right  of  a 
principal  to  profits  made  by  his  a<;ent  or  sub-agent.  Compare 
Great  Western  Insur.  Co.  v.  CunlifTe,  9  Ch.  525,  and  Baring  v. 
Stanton,  3  Ch.  D.  502,  where  the  agent's  profits  were  part  of  his 
remuneration. 

(s)  Featherstonaugh  v.  Fenwick,  17  Ves.  298.  In  such  cases 
the  other  partners  cannot  restrain  the  landlord  from  granting 
the  lease  to  the  one  partner  only.  Their  remedy  is  to  treat  the 
lessee  as  a  trustee  for  the  firm,  Alder  v.  Fouracre,  3  Swanst.  489. 

1  One  partner  cannot  acquire  for  himself  alone  an  adverse  title 
to  the  firm  property.  Forrer  v.  Forrer  29  Gratt.  134  (1877"l ; 
Kinsman  v.  Park  hurst  18  How.  289  (1855);  Washburn  v.  Wash- 
burn 23  Vt.  576  (1851);  nor  any  interest  in  its  property  whicli 

would  be  beneficial  to  the  firm,  unless  with  his  co-partner's  con- 
sent thereto. 

2  Leach  v.  Leach,  18  Pick.  68  (1836);  Mitchell  v.  Read, 61  N.  Y. 
123  (1874);  Struthers  v.  Pearce,  51  N.  Y.  357  (1873). 


JSO 


DUTY  TO  OBSERVE  GOOD  FAITH. 


Bk.  III. 
Chap.  2.  Sect. 
2. 


Clegg  v. 
Fishwick. 

[*308] 


Open  re- 
newal. 

Clegg  v. 
Edmondson. 


a  renewal  of  the  lease  of  the  partnership  premises,  im- 
mediately dissolved  the  partnership,  and  sought  to  ex- 
clude the  plaintiff,  their  co-partner,  from  all  interest 
in  the  new  lease  :  but  in  taking  the  accounts  of  the 
partnership,  the  new  lease  was  held  to  be  part  of  the 
assets  of  the  firm. 

Clegg  v.  Fishwick  (t)  is  another  case  to  the  same  ef- 
fect. *  There  the  plaintiff  was  the  administratrix  of  one 
of  several  partners  in  a  coal  mine,  and  she  filed  a  bill, 
some  years  after  the  death  of  the  deceased,  against  the 
surviving  partners,  for  an  account  and  a  dissolution, 
and  for  a  declaration  that  a  renewed  lease,  which  had 
been  obtained  by  the  defendants,  might  be  declared 
subject  in  equity  to  a  trust  for  the  benefit  of  the  part- 
nership. A  twofold  defence  was  set  up,  viz.,  first,  that 
the  old  partnership  ended  with  the  old  lease,  and  that 
the  plaintiff  could  not  therefore  claim  any  interest  in 
the  new  lease  ;  and  secondly,  that  she  had  some  time 
before  the  filing  of  the  bill,  assigned  all  the  share  of 
the  deceased  to  his  children  ;  and  that  she,  therefore, 
at  any  rate,  had  no  right  to  institute  proceedings  re- 
specting such  share.  It  was,  however,  decided  first, 
that  the  old  lease  was  the  foundation  for  the  new  one, 
and  that  parties  interested  jointly  with  others  in  a  lease, 
could  not  take  the  benefit  of  a  renewal  to  the  exclusion 
of  those  others  ;  and  secondly,  that  what  had  been  as- 
signed by  the  plaintiff,  was  the  share  of  the  deceased 
in  the  partnership,  which  share  had  never  been  ascer- 
tained ;  and  that  the  effect  of  the  assignment  was 
merely  to  constitute  her  a  trustee  of  the  share  for  the 
assignees  after  she  had  got  it  in,  and  not  to  deprive  her 
of  her  power  to  call  for  a  realisation  of  the  partner- 
ship property. 

In  both  of  these  cases  the  renewal  of  the  lease  was 
clandestine.  But  that  is  not  an  essential  feature.1  In 
the  more  recent  and  very  important  case  of  Clegg  v. 
Edmondson  (u),  the  partnership  was  at  will  ;  the  man- 
aging partners  gave  notice  of  dissolution  and  of  their 
intention  to  renew  the  old  lease  for  their  own  benefit. 
They  afterwards  did  so,  the  other  partners  protesting, 

(i)  1  Mac.  &  G.  294.  See,  too,  Clements  v.  Hall,  2  De  G.  &  J. 
173,  and  24  Beav.  333. 

(«)  8  De  G.  Mc.  &  G.  787. 

1  See  Chittenden  v.  Witbeek,  50  Mich.  401  (1883),  where  A.,  a 
partner  in  a  iirin  of  hotel  keepers,  dies-  and  by  his  death  the 
partnership  is  dissolved,  and  the  surviving  partner,  B..  renews 
the  lease  of  the  hotel  for  his  own  use.  Here  it  was  held  that 
B.  could  not  be  expected  to  account  to  A.'s  executors  for  his 
profits,  since  he  ran  all  the  risks  in  the  venture. 


BENEFIT  OBTAINED  BELONGS  TO  THE  FIRM.  381 

and  there  was  evidence  to  show  that  the  landlord  ob-  Bk.  III. 
jected  to  renew  to  any  persons   except  the  managing  ^'naP-  2-  Sect, 

partners   (x).     It  was  held,  however,  that  it  was  not  J 

competent  for  the  managing  partners  thus  to  acquire 
for  themselves  alone  the  benefit  of  the  renewed  leasefy).1 

A  partner  by  renewing  a  lease  against  the  will  of  his  co-  Right  to  re- 
*partners,  cannot  force  it  on  them  and  compel  them  to  [  *  309] 
treat  the  property  comprised  in  it  as  acquired  for  the  Ject  renewed 
firm,  unless  there  is  some  agreement  binding  them  so  to 
do  O). 

The  principle  which  precludes  a  partner  from  retain-  Benefits 
ing  for  himself  benefits  which  he  ought  to  share  with  derive/l  from 
his  co-partners,  is  applied  to  cases  in  which  unfairness  Jjgfghh? 
and  misconduct  are  by  no  means  so  apparent  as  in  those  property, 
just  cited.     A  high  standard  of  honour  requires  that 
no  partner  shall  derive  any  exclusive  advantage  by  the 
employment  of  the  partnership  property,  or  by  engag- 
ing in  transactions  in  rivalry  with  the  firm. 

Thus,  in  Burton  v.  Wookey  (a),  the  plaintiff  and  the  Burton  v. 
defendant  were  partners  as   dealers  in   lapis  calamin-  Wookey. 
aris.      The  defendant   who   was    a   shopkeeper,    lived  Profit  of 
near  the  mines  in  which  the  ore  was  got,  and  he  pur-   a  y  s  op" 
chased  it  of  the  miners.     Instead,  however,  of  paying 
them  with  money,  he  paid  them  with  shop  goods,  and  in 
his  account  with  the  plaintiff  charged  him  as  for  cash 
paid  to  the  amount  of  the  selling  price  of  the  goods. 
The  plaintiff  contended  that  the  price  of  the  ore  ought, 
as  between  himself  and  the  defendant,  to  be  considered 
as  being  the  cost  price  of  the  goods  given  in  exchange 
for  it,  and  that  the  profit  made  by  the  exchange  ought 
to  be  accounted  for  to  the   partnership.     The    Court 
adopted  this  view  ;  holding  that  it  was  the  duty  of  the 
defendant  to  buy  the  ore  at  the  lowest  possible  price, 
and  to  charge  the  partnership  with  no  more  than  he 
actually  gave  for  the  goods  bartered  for  the  ore.     An 

(x)  See  as  to  this,  Fitzgibbon  v.  Scanlan,  1  Dow.  269. 

(y)  At  the  same  time  relief  against  them  was  refused  on  the 
ground  of  laches  and  delay  on  the  part  of  the  plaintiffs.  On 
this  point  the  case  will  be  noticed  hereafter.  See  book  iii.  c. 
10,  §  3. 

(z)  Clements  v.  Norris,  8  Ch.  D.  129,  where  an  attempt  of 
this  sort  was  defeated. 

(a)  6  Madd.  367. 

1  The  principles  laid  down  in  the  text  in  regard  to  the  renewal 
of  leases,  of  course,  do  not  apply  where  the  original  leasehold  is 
not  the  property  of  the  firm  as,  for  example,  where  A.  is  lessee 
of  a  mine  or  quarry  and  he  subsequently  takes  B.  in  with  him  as 
partner,  for  the  purpose  of  working  it.  Phillips  v.  Reeder,18  N. 
J.  Eq.  95  (1867). 


3S2 


DUTY  TO  OBSERVE  GOOD  FAITH. 


Bk.  III. 
Chap.  2.  Sect. 
2. 

Gardner  v. 
McCutcheori. 
Part-owners 
of  ships. 

[  *  310] 


Benefits 
resulting 
from  connec- 
tion with 
the  firm. 


account  of  the  profit  made  by  the  defendant  in  hi3 
barter  of  the  goods  was  decreed  accordingly. 

Again,  in  Gardner  v.  McCutcheon  (b),  a  ship,  of 
which  the  plaintiffs  and  the  defendant  were  part-own- 
ers and  the  defendant  was  master,  was  employed  for  the 
common  benefit  of  all  in  *  trading  and  carrying  under 
charter.  The  defendant,  during  the  time  the  ship  was 
thus  employed,  traded  on  his  own  account  and  made 
considerable  profit.  It  was  held  that  he  was  bound  to 
account  for  the  profits  thus  obtained.  He  was  bound 
to  trade  to  the  best  of  his  ability  for  the  joint  interest 
of  himself  and  co-owners  ;  he  had  no  right  to  employ 
the  partnership  property  in  a  private  speculation  for 
his  own  benefit ;  and  although  he  alleged  that  the  pro- 
fits were  made  solely  by  the  employment  of  his  own 
private  capital,  and  that  by  custom,  masters  of  ships 
were  allowed  to  trade  for  their  own  benefit,  the  Court 
declined  to  recognize  aDy  such  custom,  and  considered 
that  the  profits  had  been  made  by  the  employment  of 
what  was  not  the  defendant's  exclusively,  and  that  the 
plaintiffs  had  therefore  a  right  to  share  them. 

A  partner,  moreover,  is  not  allowed  in  transacting 
the  partnership  affairs,  to  carry  on  for  his  own  sole  benefit 
any  separate  trade  or  business  which,  were  it  not  for 
his  connection  with  the  partnership,  he  would  not  have 
been  in  a  position  to  carry  on.  Bound  to  do  his  best 
for  the  firm,  he  is  not  at  liberty  to  labour  for  himself 
to  their  detriment  ;  and  if  his  connection  with  the  firm 
enables  him  to  acquire  gain,  he  cannot  appropriate  that 
gain  to  himself  on  the  pretence  that  it  arose  from  a 
separate  transaction  with  which  the  firm  had  nothing 
to  do.  This  is  well  exemplified  by  the  cases  as  to  re- 
newed leases  which  have  been  already  referred  to  (c),1 

(b)  4  Beav.  534.  See.  too,  Benson  v.  Heathorn,  1  Y.  &  C.  C. 
C.  326,  and  2  Coll.  309  ;  Miller  v.  Mackay,  31  Beav.  77  ;  Shall- 
cross  v.  Oldham,  2  J.  &  H.  609  ;  and  as  to  commissions,  Holden 
v.  Webber,  29  Beav.  117.  Compare  Miller  v.  Mackay,  34  Beav. 
295,  where  the  profits  were  held  to  belong  to  him  who  made 
them.  In  Moffat  v.  Farquharson,  2  Bro.  C.  C.  338,  a  part-owner 
of  a  ship  was  held  to  be  exclusively  entitled  to  money  paid  him 
for  his  vote  in  the  appointment  of  a  master.  But  see  on  that 
«ase  the  note  to  it  in  Mr.  Belt's  edition.     See  infra,  c.  4,  \  1. 

(c)  Ante,  p.  307. 

1  Where  A.  who  was  employed  by  his  firm  to  collect  a  mort- 
gage debt,  foreclosed  the  mortgage  and  bought  in  the  land  for 
himself  at  the  foreclosure  sale,  at  a  price  which  more  than  met 
the  firm's  claim,  it  was  held  that  he  was  under  no  obligation  to 
account  to  his  partners  for  his  profits  on  the  purchase,  there  be- 
ing a  very  inequitable  agreement  among  the  partners  to  bluff  off 
other  creditors.     Wheeler  v.  Sage,  1  Wall.  518  (1863). 


PARTNER  CANNOT  RETAIN  SEPARATE  BENEFIT.  383 

and  by  Russell  v.  Aushvick,  which  also  shows  that  the  Bk.  III. 
same  principles  apply  wherever  there  is  an  agreement  ChaP-  2-  Sect- 

to  share  profits  7; 

In  Russell  v.  Aushvick  (d)  several  persons  agreed  to  Carriers  not 
carry  on  business  as  carriers  between  London  and  Fal-  partners  in- 
mouth  ;  but  they  expressly  stipulated  that  no  partner-  ter  se" 
ship  should  subsist  betiueen  them,  and  that  each  should  a"8?*1-  £ 
have  a  certain  portion  of  the  road  over  which  he  was  to 
carry.     Business  was  commenced  and  carried  on  by  the 
parties  to  this  agreement  under   the  name  of  Messrs. 
Russell  &  Co.,  and  they  were  employed  to  carry  bullion 
from  Falmouth  and    Plymouth    to  London.     On  the 
*  issue  of  a  new  silver  coinage  by  the  Bank  of  England,  [  *311] 
Austwick,  who  appears  to  have  been  the  London  agent 
of  the  carriers,  entered  into  a  contract  with  the  Master 
of  the  Mint  for  the  carriage  of  the  new  coin  to  towns  on 
the  road  between  London  and  Falmouth.     Shortly  after* 
wards  he  entered  into  another  contract  with  the  Master 
of  the  Mint  for  the  conveyance  of  more  new  coin  to 
towns  in  Middlesex,  and  the  adjoining  counties.     None 
of  these  last  towns  lay  on  the  road  leading  from  Lon- 
don to  Falmouth,  and  many  of  them  were  only  accessi- 
ble by  cross  country  roads,  and  in  consequence  of  the 
increased  risk  of  carriage  along  these  roads,  the  Mint 
authorities  agreed  to  pay   7s.  6c/.  per  cent,  for  all  the 
coin  sent  from  the  Mint,  instead  of    5s.  per  cent.,  which 
was  the  remuneration  agreed  on  in  the  first  contract. 
Austwick  contended  that  he  was  entitled  to  the  whole 
benefit  of  this  second  contract,  because  (except  as  to 
the  extra  2s.  6d.)  it  had  nothing  to  do  with  the  carrying 
business  between  London  and  Falmouth  ;  and  because, 
as  to  the  2s.  Qd.,  that  sum,  although  calculated  on  all  the 
coin  carried,  whether  under  the  first  or  the  second  agree- 
ment, was  in  fact  paid  by  the  Mint  in  consideration  only 
of  the  extra  risk  attending  the  carriage  to  the  towns  speci- 
fied in  the  second  contract.  On  the  other  hand  it  was  con- 
tended and  held,  that  the  second  agreement  ought  to  be 
considered  as  made  on  account  of  all  the  persons  inter- 
ested in   the  first   agreement  ;  because,  although    the 
common  concern  had  no  connection  with  the  provincial 
roads    which  were  the  occasion  of  the  second  agree- 
ment, yet  this  agreement  was  entered  into  by  the  officers 
of  the  Mint  as  connected  with,  and  a   continuation  of, 
the  first  agreement,  and  in  confidence  of  the  responsi- 
bility of  the  parties  to  it. 

{d)  1  Sim.  52.  See,  also,  as  to  benefits  derived  by  one  co- 
owner  of  a  mine  from  the  use  of  a  shaft  situate  in  his  own  land, 
but  used  fur  the  mine,  Clegg  v.  Clegg,  :}  Girl.  322. 


384 


DUTY  TO  OBSERVE  GOOD  FAITH. 


Bk.  III. 

Chap.  2.  Sect. 


Distinct 
businesses. 
Lock  v. 
Lynam. 

[*312] 


One  partner 
competing 
•with  firm. 


This  case  of  Russell  v.  Austwick  shows  how  difficult 
it  is  for  a  partner  to  benefit  himself  exclusively,  by 
dealings  which  in  honour  he  ought  not  to  have  engaged 
in  except  for  the  common  benefit  of  the  firm. 

Lock  v.  Lynam,  which  came  before  the  Court  of 
Chancery  in  Ireland,  affords  another  instructive  exam- 
ple of  the  application  of  the  same  wholesome  doctrine. 
In  this  case  (e)  the  plaintiff  *  and  the  defendant  had 
agreed  to  share  the  profit  and  loss  arising  from  con- 
tracts taken  by  the  defendant  for  the  supply  of  meat 
and  bread  to  Her  Majesty's  forces  in  Ireland.  Whilst 
this  agreement  was  in  force  the  defendant  entered  into 
secret  agreements  with  other  persons  to  share  with 
them  the  profit  and  loss  accruing  in  respect  of  similar 
contracts  entered  into  and  taken  by  them.  The  plain- 
tiff claimed  a  share  in  the  profits  made  by  the  defend- 
ant under  these  secret  agreements;  whilst  the  defend- 
ant contended  that  he  was  entitled  to  retain  them  for 
his  own  exclusive  benefit.  The  Lord  Chancellor  ob- 
served, that  in  all  cases  of  this  kind  the  real  question 
was,  whether,  from  the  nature  of  the  transaction  be- 
tween the  partners,  there  was  any  express  or  implied 
contract  against  other  dealings  of  a  lrke  character;  and 
that  although  there  was  no  engagement  not  to  enter  into 
any  other  partnership  of  the  same  kind, still  it  never  could 
have  been  in  the  contemplation  of  either  of  the  parties 
that  one  partner  should,  in  his  own  name  or  in  that  of  any 
other  person,  adopt  contracts  to  the  prejudice  of  the 
other's  interest.  A  decree  was  accordingly  made  directing 
an  enquiry  whether,  during  the  period  for  which  any 
partnership  between  the  plaintiff  and  the  defendant  ex- 
isted, the  defendant,  either  alone  or  jointly  with  any  other 
person  or  persons,  separately  from  the  plaintiff,  entered 
into,  or  was  beneficially  interested  in,  any  other  contract 
or  dealing  of  the  like  nature  with  those  in  which  the 
plantiff  and  the  defendant  were  engaged  as  partners. 

After  the  decisions  to  which  attention  has  now  been 
drawn,  there  can  be  little  doubt  that  a  partner  cannot, 
either  openly  or  secretly,  lawfully  carry  on  for  his  own 
benefit  any  business  in  rivalry  with  the  firm  to  which 
he  belongs  (/).'     But  where  a  partner  carries  on   a 

(e)  Lock  r.  Lynam,  4  Ir.  Ch.  188.  Compare  this  and  the  last 
case  with  Miller  v.  Mackay,  34  Beav.  295;  and  see  Somerville  v. 
Mackay,  18  Ves.  382. 

(/)  See  Glassington  v.  Thwaites,  1  Sim.  &  Stu.  124;  England 
v.  Curling,  8  Beav.  129,  in  which,  however,  there  was  something 
more  than  mere  rivalry. 

1  Marshall!'.  Johnston,  33  Ga.  500  (1863)  ;  Bast's  Appeal,  70  Pa. 


POWER  OF  MAJORITY.  385 

business  not  connected  with  or  competing  with  that  of  Bk.  Ill: 
the  firm,  his  partners  have  no  right  to  the  profits  he  Chap.  2.  Sect. 

thereby  makes,  even  if  he  has  agreed  not  to  carry  on  J 

any  separate  business  (g). 

*  Again,  it  has  been  held  competent  for  one  partner  [  *  313] 
to  acquire  for  himself  the  share  of  a  co-partner  in  the  Buying 
partnership  business,  without  informing  the  other  part-  snare- 
ners  of  the  purchase,  and  without  giving  them  an  op-  tassels  v. 
portunity  of  acquiring  it  (h).1     The  articles  of  part- 
nership did  not  forbid  such  a  purchase  ;  nor  was  it  any 
part  of  the  business  of  the  firm  to  buy  the  shares  of 
its  members. 

The  same  obligation  to  act  with  good  faith  exists  be-  Partnership 
tween  persons  who  have  agreed  to  become  partners  :  not  J"et 
and  if  one  of  them  in  negotiating  for  the  acquisition  of 
property  for  the  intended  firm,  receives  a  bonus  or  com-  -\yhitehouse 
mission,  he   must  account    for   it   to   the    firm    when 
formed  (t).      He  cannot  retain  it  for  himself  on  the 
ground  that  it  was  paid  him  for  personal  services  ren- 
dered to  the  vendor  before  any  partnership  existed. 
Having   obtained  the    benefit,  whilst    negotiating    for 
himself  and  his  future  partners,  he  must  share  such 
benefit  with  them  (k).2 


Section  III. — Of  the  Powers  of  a  Majority  of  Part- 


In  the   event  of   a   difference  arising  between  part-  Disputes  be- 
ners,  it  becomes  necessary  to  consider  whether  there  is  tween 
any  method  of  determining  which  of  them  is  to  give  partners, 
way  to  the  other.     It  is  not  uncommonly  supposed  that 
the  minority  of  the  partners,  if  they  are  unequally  divid- 
ed, must  submit  to  the  majority.      But  this  is  by  no 
means  the  casp  ;  for,  as  will  be  seen  presently,  the  ma- 

(g)  Dean  v.  Macdowell,  8  Ch.  D.  345.  An  injunction  might 
have  been  obtained,  and  perhaps  damages  for  a  breach  of  cove- 
nant. 

(h)  Cassels  v.  Stewart,  6  App.  Ca.  64. 
(t)  Fawcett  v.  Whitehouse,  1  R.  &  M.  132. 
(k)  Ibid.     See,  also,  Hichens  v.  Congreve,  1  R.  &  M.  150.  and 
other  cases  of  that  class,  relating  to  promoters  of  companies. 

St.  301  (1872)  ;  Fletcher  v. Ingram. 46  Wis.  191  (1879)  ;Todd  r.Raf- 
ferty,  30  N.  J.  Eq.  254  (1878).  It  was  held  in  Pierce  v.  Daniels, 
25  Vt.  624  (1853)  that,  whore  there  is  no  deception  about  the 
matter,  a  dormant  partner  may  have  a  rival  interest  in  the  same 
kind  of  business  as  that  in  which  his  firm  is  engaged. 

1  Bissell  v.  Foss  114  U.  S.,  252  (1884). 

2  See  note  2  on  page  303. 

*  2   LAW   OF   PARTNERSHIP. 


386 


POWER  OF  MAJORITY. 


Bk.  III. 
Chap.  2.  Sect. 

o. 

How  to  be 

settled. 


[*314] 


1.  Disputes 
on  matt  lis 
arising  in 
ordinary 
course  of 
business. 


Power  of 
majority  in 
such  cases. 


jority  cannot  oblige  the  minority  except  within  certain 
limits. 

Tbe  first  point  to  determine  is,  whether  the  partner- 
ship articles,  do  or  do  not  contain  any  express  provi- 
sion applicable  to  the  matter  in  question  ;  for  if  they 
do,  such  provision  ought  to  be  obeyed  (I).  If  they  do 
not,  then  the  nature  of  the  *  question  at  issue  must  be 
examined  ;  for  there  is  an  important  distinction  be- 
tween differences  which  relate  to  matters  incidental  to 
carrying  on  the  legitimate  business  of  a  partnership, 
and  differences  which  relate  to  matters  with  which  it 
was  never  intended  that  the  partnership  should  con- 
cern itself. 

With  respect  to  the  first  class  of  differences,  regard 
must  be  had  to  the  state  of  things  actually  existing  ; 
for,  as  a  rule,  if  the  partners  are  equally  divided,  those 
who  forbid  a  change  must  have  their  way:  in  re  communi 
potior  est  conditio  prohibentis  (ra).  "Upon  this  princi- 
ple it  is  that  one  partner  cannot  either  engage  a  new  or 
dismiss  an  old  servant  against  the  will  of  his  co-part- 
ner (n);  nor,  if  the  lease  of  the  partnership  place  of 
business  expires,  insist  on  renewing  the  lease  and  con- 
tinuing the  business  at  the  old  place  (o). 

If,  however,  in  a  case  of  this  description,  unprovided 
for  by  previous  agreement,  the  partners  are  unequally 
divided,  the  minority  must,  the  author  apprehends,  give 
way  to  the  majority  (p).1  This  is  the  rule  applicable  to 
companies  whether  incorporated  or  unincorporated  (q); 
it  is  the  rule  adopted  in  the  Indian  contract  act  (r); 
and  it  is  practically  reasonable  and  convenient.  The 
only  alternative  is  to  hold  that  if  partners  disagree, 
even  as  to  trifling  matters   of  detail,  the  minority  can 

(/)  As  to  the  construction  of  partnership  articles,  see  infnt.c.9. 

(m)  But  see  as  to  the  employment  of  a  ship,  Abbott  on  Ship- 
ping, p.  82.  ed.  9,  and  p.  58,  ed.  12  ;  and  as  to  completing  con- 
tracts already  entered  into,  Butchart  v.  Dresser,  4  De  G.  M.  & 
G.  545. 

(n)  See  Donaldson  v.  Williamson,  1  Cr.  &  M.  345. 

(o)  Clements  v.  Norris,  8  Ch.  D.  129.  N.  B. — The  partnership 
had  not  expired. 

(p)  See  Gregory  v.  Patchett.  33  Beav.  595 ;  Const  v.  Harris,  T. 
&  R.  518  :  Robinson  v.  Thompson,  1  Vein.  465 ;  as  to  opening  ac- 
counts. Morgan's  case,  1  M.  &  G.  235. 

(?)  See  Stevens  v.  South  Devon  Rail.  Co.,  9  Ha.  326;  Simpson 
r.  Westminster  Palace  Hotel  Co.,  2  De  G.  F.  &  J.  141  ;  Kent  r. 
Jackson.  2  De  G.  M.  &  G.  49,  aud  14  Beav.  367. 

(r)  §  253,  cl.  5. 

Peacock  v.  Cum mings.  46  Pa.  St.  434  (1863);  Zabriskie  v. 
Hackensack  &  New  York  R.  R.  Co.,  18  N.  J.  Eq.  178  (1867); 
Johnston  v.  Dutton,  27  Ala.  245  (1855);  Kirk  v.  Hodgson,  3 
Johns.  Ch.  400  { );  Staples  v.  Sprague,  75  Me.  458  (1S83). 


MATTERS  WITHIN  SCOPE  OF  BUSINESS.  387 

forbid  all  change,  and  perhaps  bring  the  business  of  the  Bk.  III. 
firm  to  a  dead-lock,  for  which  the  only  remedy  is  a  dis-  Chap.  2.  Sect. 

solution.     At  the  same  time  the  author  is  not  aware  of  J 

any  clear  and  distinct  authority  in  support  of  the 
proposition  that  even  in  such  matters  a  dissentient 
partner  must  give  way  to  his  co-partners  (s). 

However,  a  majority  cannot  against  the  will  of  the 
minority  *  delegate  to  a  manager  the  right  to  sign  the  [  *  315] 
partnership  name  (t);  and  it  is  doubtful  whether  a 
majority  can  decide  where  the  partnership  business  shall 
be  carried  on  when  the  lease  of  its  place  of  business 
expires  (u). 

A  very  important  rule  respecting  the  powers  and  All  partners 
votes  of  majorities  is,  that  a  majority,  to  have  any  entitled  to  be 
weight,  must  act  and  be  constituted  with  perfect  good  heard, 
faith  ;  for  every  partner  has  a  right  to  be  consulted, 
to  express  his  own  views,  and  to  have  those  views  con- 
sidered by  his  co-partners.  In  the  language  of  Lord 
Eldon,  "  that  is  the  act  of  all  which  is  the  act  of  the 
majority,  provided  all  are  consulted,  and  the  majority 
are  acting  bond  fide,  meeting  not  for  the  purpose  of 
negativing  what  any  one  may  have  to  offer,  but  for  the 
purpose  of  negativing  what,  when  they  are  met  to- 
gether, they  may  after  due  consideration  think  proper 
to  negative.  For  a  majority  of  partners  to  say,  We 
do  not  care  what  one  partner  may  sav  ;  we,  being  the 
majority,  will  do  what  we  please,  is,  I  apprehend,  what 
a  court  of  equity  will  not  allow  "  (x). 

Moreover,  where  powers  are  conferred  on  a  majority  Majorities  at 
present  at  a  meeting  of  not  less  than  a  certain  number  meetings, 
of  persons,  unless  such  meeting  be  duly  convened  and 
the  requisite  number  be  present  at  the  meeting  the 
powers  in  question  cannot  be  exercised  ;  and  although 
it  may  be  true  that  the  required  number  of  persons 
was  summoned,  and  that  the  absentees  could  not  have 
turned  the  scale,  this  will  not  render  valid  the  acts  of 
the  majority  of  those  actually  present,  for  that  is  not 
such  a  majority  as  was  originally  contemplated  (y). 

00  Pollock's  Dig.  \  36,  adopts  the  author's  view,  but  appar- 
ently on  his  authority. 

(I)  See  Beveridge  v.  Beveridge,  L.  R.  2  Sc.  App.  183. 

(m)  See  Clements  v.  Norris,  8  Ch.  D.  129,  but  note  there  the 
firm  consisted  of  two  members  only. 

(x)  Const  v.  Harris,  Turn.  &  R.  525,  and  see  ib.  518,  and 
Blisset  v.  Daniel,  10  Ha.  493;  Great  Western  Rail.  Co.  v.  Rush- 
out,  5  De  G.  &  Sm.  310. 

(y)  See  Re  London  and  Southern  Counties  Freehold  Land  Co., 
31  Ch.  D.  223  ;  Howbeach  Coal  Co.  v.  Teague,  5  H.  &  N.  151  • 
Ex  parte  Morrison,  De  G.  539. 


388 


POWER  OF  MAJORITY. 


Bk.  III. 
Chap.  2.  Sect. 

2.  Disputes 
on  matters 
involving  a 
change  in 

[*316] 

the  nature  of 
the  business. 
One  dissen- 
tient can  for- 
bid a  change. 


In  companies 
as  well  as  in 
partnership. 


Fire  and  life 
Insurance 
Company 
turning  into 
a  Maritime 
Insurance 
Company. 
Natusch  v. 
Irving. 


Passing  now  to  the  second  class  of  differences,  viz., 
those  which  relate  to  matters  with  which  the  partner- 
ship was  never  intended  to  concern  itself,  it  has  been 
over  and  over  again  decided  that  no  majority,  however 
large,  can  lawfully  engage  the  partnership  in  such 
matters  against  the  will  of  even  one  dissentient  partner. 
Each  partner  is  entitled  to  say  to  the  ^others,  "  I  be- 
came a  partner  in  a  concern  formed  for  a  definite  pur- 
pose, and  upon  terms  which  were  agreed  upon  by  all 
of  us,  and  you  have  no  right,  without  my  consent,  to 
engage  me  in  any  other  concern,  nor  to  hold  me  to  any 
other  terms,  nor  to  get  rid  of  me,  if  I  decline  to  assent 
to  a  variation  in  the  agreement  by  which  you  are  bound 
to  me  and  I  to  you."  Nor  is  it  at  all  material  that  the 
new  business  is  extremely  profitable  (z).  This  prin- 
ciple is  applicable  to  all  partnerships  and  companies, 
whether  great  or  small,  and  is  evidently  one  which  re- 
quires only  to  be  stated  to  be  at  once  assented  to  as 
being  just.  No  cases  upon  this  subject  can  be  referred 
to  with  greater  advantage  than  Natusch  v.  Irving  and 
Const  v.  Harris,  both  of  which  were  decided  by  Lord 
Eldon  (a).1 

In  Natusch  v.  Irving  (b),  a  company  was  formed  in 
the  early  part  of  the  year  1824  for  granting,  fire  and 
life  assurances.  The  capital  was  5,000,000/,  divided 
into  fifty  thousand  100/.  shares.  The  plaintiff  was  one 
of  the  original  subscribers,  and  held  fifteen  sharps,  in 
respect  of  which  he  had  paid  the  required  deposit,  but 
he  had  not  executed  the  company's  deed  of  settlement. 
In  conformity  with  the  rules  of  the  company  he  had 
effected  a  policy  with  it  on  his  life  for  1500/.  In  the 
summer  of  1824,  the  act  of  6  Geo.  1,  prohibiting  com- 
panies from  carrying  on  the  business  of  marine  in- 
surance, was  repealed,  and  shortly  afterwards  adver- 
tisements appeared  in  the  newspapers,  stating  that  the 
company  would  commence  the  business  of  marine 
insurance.  The  plaintiff,  in  answer  to  an  inquiry 
whether  this  announcement  was  authorized  by  the 
directors,  was  informed  that  it  was,  and  that  if  he  ob- 
jected to  the  course  about  to  be  pursued  he  mi^lit 
receive  back  his  deposit  with  interest,    and  have    his 

(z)  A.-G.  r.  Great  Northern   Rail.  Co..  1  Dr.  &  Sm.  154. 

{a)  See.  too,  Davis  v.  Hawkins.  3  M.  &  S.  488;  Fennin-ps  r. 
Grenville,  1  Taunt.  241  :  Glassington  v.  Thwaites,  1  Sim.  &  Stu. 
131. 

(b)  Gow  on  Partnership.  App.  398;  ed.  3.  See,  also.  The 
Phcenix  Life  Insur.  Co.,  2  J.  &  H,  441. 

1  Zabriskie   v.  H.  &  N.  Y.  R.  R.  Co.,   18  N.  J.  Eq.  i78  (1867). 


MATTERS  BEYOND  SCOPE  OF  BUSINESS.  3S9 

policy  cancelled  and  the  premium  returned.     In  reply  Bk.  III. 

to  this,  the  plaintiff  stated  that  he  was  ready  to  execute  ^haP-  2-  Sect> 

any  deed  which  was  in  conformity  with  the  prospectus  ;  J 

that  he  conceived  it  competent  for  him  to  insist  that 
the  business  in  which  he  was  a  partner  should  be  carried 
*on  according  to  the  agreement  which  united  the  partners  [  *  317] 
together  :  that  he  could  not  think  his  doing  so  would  Natusch  ». 
entitle  the  managers  of  that  partnership  to  pay  him  Irving, 
out  his  capital,  and  deprive  him  of  a  share  in  a  con- 
cern of  which  he  had  the  highest  opinion  ;  that  he 
therefore  required  the  directors  to  abstain  from  any 
contracts  or  engagements  relating  to  marine  insurance, 
as  not  being  contemplated  by  himself  and  those  who 
joined  the  company  upon  the  terms  of  the  prospectus, 
and  that  he  required  an  undivided  attention  on  the  part 
of  the  directors  to  the  objects  defined  therein.  The 
plaintiff  afterwards  attended  at  the  office  of  the  com- 
pany, to  execute  its  deed  of  settlement,  but  finding  that 
it  contained  provisions  enabling  the  company  to  carry 
on  the  business  of  marine  insurance,  he  refused  to 
execute  it,  as  not  being  conformable  to  the  terms  on 
which  the  company  was  formed.  In  pursuance  of  the 
advertisements,  the  company  had  commenced,  and  it 
was  carrying  on,  the  business  of  marine  insurance  ;  but 
there  was  no  evidence  to  show  acquiescence  on  the  part 
of  the  plaintiff,  and  there  was  evidence  to  show  con- 
tinued opposition  by  him  to  the  carrying  on  of  such 
business.  The  plaintiff  applied  for  an  injunction  to 
restrain  the  directors  from  effecting  marine  insurances, 
and  an  injunction  was  granted  (c).  The  judgment  of 
Lord  Eldon,  as  far  as  it  relates  to  the  power  of  a 
majority,  is  particularly  valuable,  and  the  following 
extracts  from  it  are  constantly  referred  to. 

With  respect  to  the  liberty  given  to  the  plaintiff  to  retire,  his  Answer  to 
lordship  said:     "An  offer  is  made  to  the  plaintiff  that  he  may  ohjection 
receive  back  his  deposit,  with  interest  from  the  date  of  the  pay-  tnat.  fUs~ 
ment,  and  he  is  desired  to  consider  himself  as  having  received  xe^xe 
notice  thereof.     But  it  is  not,  I  apprehend,  competent  to   any 
number  of  persons  in  a  partnership  (unless  they  show  a  contract 
rendering  it  competent  to  them)  formed  for  specified  purposes,  if 
they  propose  to  form  a  partnership  for  very  different  purposes,  to 
effect  that  formation  by  calling  upon  some  of  their  partners  to 

(c)  The  bill  was  filed  by  the  plaintiff  on  behalf  of  himself  and 
all  others  the  shareholders  of  the  company  against  the  directors, 
and  prayed  a  dissolution,  and,  if  necessary,  a  receiver,  and  an 
injunction  to  restrain  the  defendants  from  effecting  marine  in- 
surances in  the  name  and  on  account  of  the  company,  and  from 
using  the  name,  and  from  applying  the  capital  of  the  company 
for  such  purposes. 


390 


POWER  OF  MAJORITY. 


Bk.  III. 
Chap.  2.  Sect. 
3. 

[  *  318] 

Natusch  v. 
Irving. 


Dissentient 
need  not 
accept  an 
offer  of  in- 
demnity. 


Answer  to 
argument 
that  the 
change  was 
warranted  by 
statute. 


Observations 
on  powers  oi 
majorities. 


receive  their  subscribed  capital  and  interest  and  quit  the  con- 
cern- and  in  effect,  merely  by  compelling  them  to  retire  upon 
such  terms,  so  to  form  a  new  company.  This  would,  as  to  part- 
nerships, be  a  most  dangerous  doctrine.  *  Where  a  partnership  is 
dissolved  (even  where  it  can  be  in  a  sense  dissolved  the  instant 
after  notice  to  dissolve  is  given,  if  there  be  no  contract  to  the 
contrary),  it  must  still  continue  for  the  purpose  of  winding  up 
its  affairs,  of  taking  and  settling  all  its  accounts,  and  converting 
all  the  property,  means,  and  assets  of  the  partnership,  existing 
at  the  time  of  the  dissolution,  as  beneficially  as  may  be,  for  the 
benefit  of  all  who  were  partners,  according  to  their  respective 
shares  and  interests;  and  the  other  partners  cannot  say  to  him  to 
whom  they  have  given  an  offer  of  his  deposit  and  interest,  Take 
that,  and  we  are  a  new  company,  keeping  the  effects,  means,  as- 
sets, and  property  of  the  old,  as  the  property  of  the  new  partner- 
ship. The  company  will  indemnify  the  plaintiff  against  loss  by 
its  transactions  already  had,  or  hereafter  to  be  had,  not  for  the 
specified  purposes  of  the  institution.  But  the  right  of  a  partner 
is  to  hold  to  the  specified  purposes  his  partners  whilst  the  part- 
nership continues,  and  not  to  rest  upon  indemnities  with  respect 
to  what  he  has  not  contracted  to  engage  in.  A  dissatisfied  part- 
ner may  sell  his  shares  for  double  what  he  originally  gave  for 
them.  But  he  cannot  be  compelled  to  part  with  them  lor  that 
reason;  it  may  be  his  principal  reason  for  keeping  them,  having 
the  partnership  concern  carried  on  according  to  the  contract. 
The  original  contract  and  the  loss  which  his  partners  would  suffer 
by  a  dissolution,  is  his  security  that  it  shall  be  so  carried  on  for 
him  and  them  beneficially,  and  with  augmented  improvement  in 
the  value  of  his  shares  and  their  shares." 

With  respect  to  the  alteration  of  the  law  enabling  companies 
to  carry  on  the  business  proposed,  his  lordship  observed:  "The 
repeal  of  the  act  6  Geo.  1,  which  merely  made  it  lawful  for  socie- 
ties or  partnerships,  however  numerous  their  members  might  be 
to  insure  against  marine  risks,  could  not  make  it  lawful  for  com- 
panies or  societies,  which  were  formed  for  specified  purposes  of 
insurance  upon  lives  and  against  fire,  to  insure  against  marine 
risks,  unless  the  contracts  by  which  such  companies  were  formed, 
either  expressly  or  impliedly  (where  individual  partners  did  not 
consent  to  embarking  in  new  projects,  either  originally,  or  sub- 
sequently to  the  formation  of  the  companies),  created  an  author- 
ity in  some  part  of  the  body  to  bind  all  the  body  to  the  adoption 
of  such  new  undertakings." 

With  respect  to  the  power  of  a  majority,  his  lordship  laid  it 
down  that,  "If  six  persons  joined  in  a  partnership  of  life  assur- 
ance, it  seems  clear  that  neither  the  majority  nor  any  select  part 
of  them,  nor  five  out  of  the  six,  could  engage  that  partnership 
in  marine  insurances,  unless  the  contract  of  partnership  expressly 
or  impliedly  gave  that  power:    because  if  this  was  otherwise, 


POWER  OF  MAJORITY.  391 

an  individual  or  individuals,  by  engaging  in  one  specified  con-  Bk.  III. 
cern,  might  be  implicated  in  any  other  concern  whatever^  how-  Chap.  2.  Sect. 

ever  different  in  its  nature,  against  his  consent.     But  if  a  part  ^ 

of  the  six  openly  and  publicly  professed  their  intention  to  engage 
the  partnership  in  another  concern,  and  clearly  and  distinctly 
brought  this  to  the  knowledge  of  one  or  more  of  the  other  part- 
ners, and  such  one  or  more  of  the  other  partners  could  be  clearly 
shown  to  have  acquiesced  in  such  intention,  and  to  have  per- 
mitted the  other  partners  to  have  entered  upon,  and  to  have  en- 
gaged themselves  and  the  body  in  such  new  projects,  and  there- 
by to  have  placed  their  partners  so  engaged  in  difficulties  and 
embarrassments  unless  they  were  permitted  to  proceed  in  the 
farther  execution  of  such  projects,   if  a  court  of  equity  would 
not  go  the  length  of  holding  that  such  conduct  was  ^consent,  it  r  *  319] 
would  scarcely  think  parties  so  conducting  themselves  entitled  to 
the  festinum  remedium  of  injunction."     *    *    *    *    "Courts  must 
struggle  to  prevent  particular  members  of  those  bodies  from  engag- 
ing other  members  in  projects  in  which  they  have  not  consented 
to  be  engaged,  or  the  engaging  in  which  they  have  not  encouraged, 
assented  to,  or  empowered,  or  acquiesced  in,  expressly  or  tacitly, 
so  as  to  make  it  not  equitable  that  they  should  seek  to  restrain 
them.     The  principles  which  a  Court  would  act  upon  in  a  case  of 
a  partnership  of  six,  must,  as  far  as  the  nature  of  things  will 
admit,  be  applied  to  a  partnership  of  600."     *     *     *     "They 
who  seek  to  embark  a  partner  in  a  business  not  originally  part  of 
the  partnership  concern,  must  make  out  clearly  that  he  did  ex- 
pressly or  tacitly  acquiesce. ' ' 

la   Const  v.  Harris    (d),  the   proprietors  of   Covent  Const 
Garden  Theatre  agreed  that  the  profits  should  be   ex-  Harris, 
clusively    appropriated   to    certain    definite    purposes.  Altering 
Afterwards,    the    proprietors    of    seven    oat   of    eight  principle  on 
shares,  entered  into  an  agreement  to  apply  the   profits  whicfi  profits 
in  a  different  manner,  but  they  had  not  consulted  the  ^lt  with 
owner  of  the  other  eighth  share,  and  he  disapproved  of 
the  alteration.     It  was  held  by  Lord   Eldon,  that  the 
majority  had  no  power  to  depart  from  the  terms  of  the 
original  agreement  ;  and  upoa  a  bill   filed  by   the  one 
dissentient  partner  for  a  specific  performance  of  that 
agreemeot,  a  receiver  of  the  profits  was  appointed.     In 
a  long  and  elaborate  judgment,  Lord  Eldon  distinctly 
recognised  the  principle,  that  articles   which   had  been 
agreed  on  to  regulate  a  partnership,  cannot  be  altered 
without  the  consent  of  all  the  partners  (e). 

{d)  Turn.  &  R,  496. 

(e)  See  Turn.  &  R.  517,  523.  The  whole  judgment  is  well 
worthy  of  attentive  perusal  ;  but  being  much  to  the  same  effect 
as  that  in  Natusch  v.  Irving,  the  writer  has  not  felt  itneccessary 
to  make  extracts  from  it. 


392  POWER  OF  MAJORITY. 

Bk.  III.  In  modern  times  the   same  principle  has  been  con- 

Chap.  2.  Sect,  stantly  recognized   and  followed.     Indeed  it  is  never 

J now  disputed,  although  its  application  frequently  gives 

rise  to  contrcrversy.  The  decisions  bearing  on  this  sub- 
ject relate,  however,  to  companies,  and  are  not,  there- 
fore, further  noticed  in  the  present  treatise  (f).1 

(/)  Auld  v.  Glasgow  Working  Men's  Building  Soc,  12  App. 
Ca.  197,  is  one  of  the  most  recent  cases. 


Livingston  v.  Lynch,  4  Johns.  Ch.  573  (1820)  ;  Cooke?).  Alli- 
son, 30  La.  Ann.  Pt.  II.  963  (1878)  ;  Abbott  v.  Johnson,  32  N. 
H.  9  (1835)  ;  Packet  Co.  v.  Magrath,  McNull  (S.  Ca.),  93  (1841), 
are  examples  of  the  application  of  the  doctrine  to  partnership. 
A  settlement  of  accounts  between  two  partners  will  not  bind  the 
remaining  member  of  the  firm.  Chadsey  v.  Harrison,  11  111.  151 
(1849)  ;  Lamalere  v.  Caze,  1  Wash.  C.  C.  435  (1806).  Where 
the  articles  provide  that  a  majority  shall  govern  it  is  doubtful 
whether  even  here  anything  but  the  unanimous  consent  of  all 
the  partners  can  warrant  a  deviation  from  the  fundamental  pur- 
poses of  the  partnership.  Livingston  v.  Lynch,  4  Johns.  Ch. 
573  (1820). 


CAPITAL  OF  PARTNERSHIPS.  393 


*CHAPTER  III.  [*32°] 

OF  THE  CAPITAL  OF  PARTNERSHIPS. 

By  the  capital  of  a  partnership  is  meant  the  aggre-  gj.  tjt. 
gate  of  the  sums  contributed  by  its  members  for  the  Chap.  3. 
purpose  of  commencing  or  carrying  on  the  partnership  ~  ~  ~ 
business,  and  intended  to  be  risked  by  them  in  that  partnerships 
business.  The  capital  of  a  partnership  is  not  therefore 
the  same  as  its  property  ;  the  capital  is  a  sum  fixed  by 
the  agreement  of  the  partners  ;  whilst  the  actual  assets 
of  the  firm  vary  from  day  to  day,  and  include  every- 
thing belonging  to  the  firm  and  having  any  money 
value.  Moreover,  the  capital  of  each  partner  is  not 
necessarily  the  amount  due  to  him  from  the  firm  ;  for 
not  only  may  he  owe  the  firm  money,  so  that  less  than 
his  capital  is  due  to  him  ;  but  the  firm  may  owe  him 
money  in  addition  to  his  capital,  e.  g.,  for  money  ad- 
vanced by  him  to  the  firm  by  the  way  of  loan,  and  not 
intended  to  be  wholly  risked  in  the  business.  The 
distinction  between  a  partner's  capital  and  what  is  due 
to  him  for  advances  by  way  of  loan  to  the  firm,  is  fre- 
quently very  material  :  e.  g.,  with  reference  to  interest, 
with  reference  to  clauses  in  partnership  articles  fixing 
the  amount  of  capital  to  be  advanced  and  risked,  and 
prohibiting  the  withdrawal  of  capital  ;  and  above  all 
with  reference  to  priority  of  payment  in  the  event  of 
dissolution  and  a  deficiency  of  assets  (a).  The  amount 
of  each  partner's  capital  ought,  therefore,  always  to  be 
accurately  stated,  in  order  to  avoid  disputes  on  a  final  ad- 
justment of  account;  and  this  is  more  important  where 
the  capitals  of  the  partners  are  unequal,  for  if  there  is 
no  evidence  as  to  the  amounts  contributed  by  them,  the 
shares  of  the  whole  assets  will  be  treated  as  equal  (b). 

*\Vhen  the  agreed  amount  of  capital  of  a  partnership  r  *  321] 
has  been  exhausted,  and  the  business  cannot  be  carried  increase  and 
on  to  a  profit,  the  partnership  may  be  dissolved,  as  will  diminution 
be  pointed  out   hereafter   (c).     A  partner  cannot  be  0l  caPltal- 
compelled  to  furnish  more  capital  than  he  has  agreed 

(«)  See  on  this  suhject,  infra,  book  iii.  ch.  8,  \  1,  on  partner- 
ship accounts. 

(b)  See  as  to  the  equality  of  shares,  infra,  buok  iii.  ch.  5,  \  2 

(c)  Infra,  book  iv.  ch.  1,  \  2.  ' 


{04 


CAPITAL  OF  PARTNERSHIPS. 


Bk.  III. 
Chap.  3. 


Borrowing 
money  and 
increasing 

capital. 


to  bring  in  and  risk  ;  although  he  cannot,  by  limiting 
the  amount  of  his  capital,  limit  his  liability  for  debts 
incurred  by  the  firm  (d).  On  the  other  hand,  a  partner 
who  has  agreed  to  furnish  a  certain  amount  of  capital, 
is  bound  not  only  to  bring  it  into  the  firm,  but  also  to 
leave  it  in  the  business  until  the  firm  is  dissolved. 

It  follows  from  these  considerations  that  the  agreed 
capital  of  a  partnership  cannot  be  either  added  to  or 
withdrawn  except  with  the  consent  of  all  the  members 
of  the  partnership  (e);  and  this  rule  is  perfectly  con- 
sistent with  the  obvious  fact,  that  the  assets  and  liabil- 
ities of  a  partnership  are  necessarily  liable  to  fluctua- 
tion, and  that  the  value  of  each  partner's  share  of  such 
assets  constantly  fluctuates  also. 

The  difference  between  borrowing  money  on  the 
credit  of  a  firm  and  increasing  its  capital,  has  been 
already  adverted  to  (/) ;  and  it  has  been  seen  that 
although  each  member  of  an  ordinary  trading  partner- 
ship can  pledge  its  credit  for  money  borrowed  in  order 
to  carry  on  its  business,  he  cannot  render  it  liable  to 
repay  money  borrowed  by  him  to  enable  him  to  furnish 
the  amount  of  capital  which  he  has  agreed  to  bring 

^  (flO- 

(d)  Ante,  p.  200. 

(e)  See  Heslin  v.  Hay,  15  L.  R.  Ir.  431,  where  an  attempt  was 
made  to  violate  this  rule  ;  and  see  the  obs.  of  Lord  Bramwell  in 
Bouch  v.  Sproule.  12  App.  Ca.  4U5. 

(/)  Ante,  pp.  132,  133. 
(9)  lb- 


PARTNERSHIP  PROPERTY.  395 


*CHAPTER  IY.  [*322] 

OF  JOINT  AND  SEPARATE  PROPERTY. 

The  expressions    partnership    property,  partnership  Bk.  III. 
stock,  partnership  assets,  joint  stock,  and  joint  estate,  Chap.  4. 
are  used  indiscriminately  to  denote  everything  to  which  partnersrjip 
the  firm,  or  in  other  words  all  the  partners  composing  property. 
it,  can  be  considered  to  be  entitled  as  snch  (a).     The 
qualification  as  such  is  important  ;  for  persons  may  be 
entitled  jointly  or  in  common  to  property,  and  the  same 
persons  may  be  partners,  and  yet  that  property  may  not 
be  partnership  property  ;  e.  g.,  if  several  persons  are 
partners  in  trade,  and  land  is  devised  or  a  legacy  is 
bequeathed  to  them  jointly  or  in  common,  it  will  not 
necessarily  become  partnership  property  and  form  part 
of  the  common  stock  in  which  they  are  interested  as 
partners  (b).     Whether  it  does  so  or  does  not.  depends 
upon  circum  stances  which  will  be  examined  hereafter. 

It  is  often  a  difficult  matter  to  determine  what  is  to  Importance 
be  regarded  as  partnership  property,  and  what  is  to  be  ofdistm^ish- 
regarded  as  the    separate    property  of    each    partner,  ghipproperty 
The  question,  however,  is  of  importance  not  only  to  the  from  the 
partners  themselves,  but  also  to  their  creditors  ;  for,  as  separate 
will  be  seen  hereafter,  if  a  firm  becomes  bankrupt,  the  Pv°per^  °^ 
property  of  the  firm  and  the  separate  property  of  each 
partner  have  to  be  distinguished  from  each  other,  it 
being  a  rule  to  apply  the  property  of  the  firm  in  the 
first  place  in  payment  of  the  creditors  of  the  firm,  and 
to  apply  the  separate  properties  of  the  partners  in  the 
first  place  to  the  payment  of  their  respective  separate 
creditors. 

*  It  is  proposed,    therefore,  to  examine  the  rules  by  [  *  323  ] 
which  to  determine  what  is  the  property  of  the    firm, 
and  what  the  separate  property  of  its  members. 

It  is  for   the   partners  to  determine  by    agreement  Question 

[a)  The  expression  joint  estate  sometimes  has  a  wider  signifi- 
cation, including  all  property  which,  on  the  bankruptcy  of  the 
firm,  is  distributable  amongst  its  creditors.  See  post,  book  iv. 
ch.  4.  see.  :;.  Reputed  Ownership. 

(6)  Morris  /■.  Barrett,  :!  Y.  &  J.  384,  and  see  the  judgment  in 
Ex  parte  The  File  Banking  Co..  «  Jr.  E(i.  197,  S.  C.  on  appeal 
under  the  name  of  Re  Littles,  1U  ib.  :27.">. 


m 


PARTNERSHIP  PROPERTY. 


Bk.  III. 

Chap.  4.  Sect. 
1. 

determined 
by  agree- 
ment. 


1.  Property 
ot  the  firm. 


Property 
paid  for  by 
the  firm. 


[  *  324] 


amongst  themselves  what  shall  be  the  property  of  them 
all,  and  what  shall  be  the  separate  property  of  some 
one  or  more  of  them.  Moreover,  it  is  competent  for 
them  by  agreement  amongst  themselves  to  convert  what 
is  the  joint  property  of  all  into  the  separate  property 
of  some  one  or  more  of  them,  and  vice  versa.  The  de- 
termination, therefore,  of  the  question,  What  is,  and 
what  is  not  the  property  of  the  firm  ?  involves  an  in- 
quiry into  the  three  following  subjects,  viz  : — 

Joint  estate. 

Separate  estate. 

Conversion  of  one  into  the  other. 
Each  of  these  will  be  examined  in  order. 


Section  I. — Of  Joint  Estate. 

Whatever  at  the  commencement  of  a  partnership  is 
thrown  into  the  common  stock,  and  whatever  has  from 
time  to  time  during  the  continuance  of  tne  partner- 
ship been  added  thereto  or  obtained  by  means  thereof, 
whether  directly  by  purchase  or  circuitously  by  em- 
ployment in  trade,  belongs  to  the  firm,  unless  the  con- 
trary can  be  shown  (c).1 

The  mere  fact  that  the  property  in  question  was  pur- 
chased by  one  partner  in  his  own  name  is  immaterial, 
if  it  was  paid  for  out  of  the  partnership  monies  ;  for 
in  such  a  case  he  will  be  deemed  to  hold  the  property 
in  trust  for  the  firm,  unless  he  can  show  that  he  holds  it 
for  himself  alone  (cl).  Upon  this  *  principle  it  is  held 
that  land  purchased  in  the  name  of  one  partner,  but 
paid  for  by  the  firm,  is  the  pi*operty  of  the  firm,  al- 
though there  may  be  no  declaration  or  memorandum  in 

(c)  See  Crawshay  v.  Collins.  2  Russ.  339,  as  to  the  patents  ; 
Nerot  v  Bnrnand.  4  Rnss.  247,  and  2  Bli.  N.  S.  415;  Bone  v. 
Pollard,  24  Beav.  283.  See,  also,  as  to  co-owners  of  mines 
not  being  co-partners,  Clegg  v.  Clegg,  3  Giff.  322.  As  to  outlays 
of  partnership  money  on  the  separate  property  of  one  partner, 
see  infra,  \  2. 

(d)  See  per  Lord  Eldon  in  Smith  v.  Smith.  5  Yes.  193  ;  Eoblev 
v.  Brooke,  7  Bli.  90  ;  .Morris  v.  Barrett,  3  Y.  &  J.  384.  See, 
also,  Helmore  v.  Smith,  35  Ch.  D.  436. 

1  Clementsr.  Jessup,  36  X.  J.  Eq.  569  (1883);  Taftr.  Schwamb. 
80  111.  289  (1875).  The  fact  that  one  of  the  partners  contributes 
all  the  capital  does  not  make  that  capital  any  the  less  the  capi- 
tal of  the  firm,  Nutting  v.  Ashcraft,  101  Mass.  300  (1869);  Mal- 
ley  17.  Atlantic  Ins.  Co.,  51  Conn.  222  (1883).  In  the  case  last 
suppose  it  has  been  held  that  the  separate  creditor  of  the  part- 
ner who  contributes  the  capital  can  levy  on  the  capital  of  the 
firm,  Bowker  v.  Gleason  (X.  J.),  7  Atl.  Rep.  885  (1886);  but 
such  a  levy  by  the  creditors  of  the  non-contributing  partner  is  a 
trespass.     See  Stumph  v.  Bauer,  76  Ind.  157  (1881). 


JOINT  PROPERTY.  •     3f>7 

writing  disclosing  the  trust,  and  signed  by  the  partner  Bk.  III. 

to   whom    the    land    has  been  conveyed  "(e).1      So,   if  Chap.  4.  Sect. 

shares   in  a   company    are    bought    with    partnership  J 

money,  they  will  be  partnership  property,  although 
they  may  be  standing  in  the  books  of  the  company  in 
the  name  of  one  partner  only,  and  although  it  may  be 
contrary  to  the  company's  deed  of  settlement  for  more 
than  one  person  to  hold  shares  in  it  (/).2 

As  regards  ships  there  was  often  a  difficulty  arising  Ships, 
from  the  ship  registration  acts.  For  as  it  was  clearly 
settled  that  a  ship  belonged,  both  at  law  and  in  equity, 
to  the  person  or  persons  who  were  registered  as  her 
owners,  and  to  no  one  else,  it  followed  that  if  a  ship 
had  been  bought  with  partnership  money,  had  been 
used  as  partnership  property,  and  had  always  been 
treated  as  such  by  all  the  partners,  yet  if  she  was  reg- 
istered in  the  name  of  one  partner  only,  there  was  no 
method  by  which  that  one  could  be  prevented  from  ef- 
fectually asserting  an  exclusive  right  to  the  ship,  and 
depriving  his  co-partners  of  all  their  interest  in  her  (g). 
The  provisions  of  the  present  Merchant  shipping  acts 
differ,  however,  in  several  material  respects  from  the  en- 
actments previously  in  force  ;  and  now,  in  the  case 
above  supposed,  the  registered  partner  would  be 
deemed  a  trustee  for  the  firm  (h). 

(e)  Forster  v.  Hale.  5  Yes.  308,  and  3  ib.  696. 

(f)  Ex  parte  Connell,  3  Deac.  201;  Ex  parte  Hinds,  3  De  G.  & 
S.  613. 

{g)  See  Slater  r.  Willis.  1  Bear.  345  ;  Battersby  v.  Smvtb,  3 
Madd.  110;  Camden  v.  Anderson,  5  T.  R.  709  ;  Curtis  »>.  Perry, 
6  Yes.  739  ;  Ex  parte  Yallop,  15  Yes.  60  ;  Ex  parte  Houghton,  i? 
Yes.  251  ;  and  as  to  the  old  law  relating;  to  equitable  interests 
in  ships,  see  an  article  by  the  author  in  the  Law  Magazine  for 
May,  1862  (vol.  xiv.  p.  70,  X.  S.).  If  a  ship  was  registered  in 
the  name  of  two  partners,  the  shares  in  which  they  were  inter- 
ested might  have  been  shown.  See  Ex  parte  Jones.  4  M.  &  S. 
450.  As  to  the  right  of  one  partner  to  sell  or  mortgage  a  ship 
belonging  to  the  firm,  see  Ex  parte  Howden,  2  M.  D.  &  D.  574. 

(h)  17  &  18  Vict.  c.  104,  \\  37  and  43,  and  25  &  26  Vict.  c.  63, 
|  3.  Upon  the  construction  of  the  former  act.  see  Hughes  c. 
Sutherland,  7  Q.  B.  D.  160  ;  Liverpool  Borough  Bank  v.  Turner, 
1  J.  &  H.  159,  and  2  De  G.   F.  &  J.  502.     A  ship  may  be  regis- 

1  Campbell  v.  Campbell,  3d  X.  J.  Eq.  415  (1878);  Spalding  v. 
Wilson,  80  Ky.   589    (1883);    Bank   *•.    Sawyer,    38  Oh.   St.   339 

( );  Hardy  v.  Norfolk  Mfg.  Co.,  80  Va.  404  (1885);  Shanks  v. 

Klein.  101  C.  S.  18  (1881):  Messcr  r.  Messer,  59  X.  H.  375 
(1879);  Willet  v.  Brown,  65  Mo.  138  (1877);  Buffum  r.  Buffum, 
49  Me.  108  (186L:  McCauley  v.  Fulton,  44  Cal.  355(1872);  Mar- 
tin v.  Morris.  62  Wis.  418  (1885);  Espy  v.  Comer,  76  Ala.  501 
(is-'-]  i. 

-  Kenton  Furnace  Mfg.  Co.  v.  McAlpin,  5  Fed.  Rep.  737  (1880): 
Wilde  v.  Jenkins,  4  Paige  481  (1834). 


398  PARTNERSHIP  PROPERTY. 

[  *  3251  *  Strong  as  is  the  presumption  that  what  is  bought 

±>k.  III.  with  partnership  money  is  partnership  property,  the 

Chap.  4.  beet,  presumption  may  be  rebutted;  e.  g.,  by  showing  that 

J the  money  was  lent  by  the  firm  to  one  partner,  and  so 

Cases  where    was  not  in  fact  partnership  money  when  invested  (i).1 
property  paid  Moreover,  it  is  to  be  observed  that  property  which  has 
firm  does  not  keen  us©d  and  treated  as  partnership  property  cannot 
belong  to  it.    be  presumed  to  belong  to  one  partner  only,  simply  be- 
cause he  paid  for  it:    for  the   presumption   in  such  a 
case  is  rather  that  the  property   in  question  was  his 
contribution  to  the  common   stock  (j).~     This  subject 
will  be  adverted  to  more  at  length  in  the  next  section. 
Secret  bene-        It  has  been  already  seen  that  one  partner  will  not  be 
fits  obtained  allowed    to  retain  for  his  own  exclusive  beneht  any 
by  one  property  which  he  mav  have  acquired  in  breach  of  that 

"partner  i   »   • 

v  good  faith  which  ought  to  regulate  the  conduct  of  part- 

ners inter  se.  "Whatever  property  has  been  so  acquir- 
ed, will  be  treated  as  obtained  for  the  benefit  of  all  the 
partners,  and  as  being  part  of  the  assets  of  the  firm; 
and  this  rule  applies  to  property  obtained  by  a  continu- 
ing or  surviving  partner  in  breach  of  the  good  faith 
which  he  is  bound  to  exercise  towards  a  retired  part- 
ner, and  the  representatives  of  a  deceased  partner,  so 
long  as  their  interest  in  the  partnership  assets  contin- 
ues (k). 
Money  paid  At  the  same  time,  if  an  advantage  which  has  been 
to  one  obtained  by  a  partner  is  wholly  unconnected  with  the 

partner  ior      partnership  affairs,  or,  being  connected  with  them,  has 
liis  exclusive  .  * 

benefit.  been  conferred  upon  him  with  a  view  to  his  own  per- 

sonal benefit,  he  cannot  be  called  upon  to  account  for 
it  to  the  partnership.  For  example,  where  a  ship,  be- 
longing to  a  Frenchman  and  two  Americans  as   part- 

tered  in  the  name  of  a  company,  though  some  of  its  members  are 
foreigners.  See  IT  &  18  Vict.  v.  104.  \  18  ;  and  R.  v.  Ainaud,  9 
Q.  B.  806. 

(i)  As  in  Smith  ?-.  Smith,  5  Yes.  193.  See,  also,  Walton  v. 
Butler,  29  Beav.  428:  Ex  parte  Emly.  1  Rose.  64. 

(,;')  See  Ex  parte  Hare,  1  Deac.  25,  per  Sir  J.  Cross. 

(k)  See  ante,  p.  305  et  si  >/. 

1  McWilliams  Mfg.  Co.  v.  Blundell,  11  Fed.  Rep.  419  (1— -2  : 
Keller  v.  Stolzenbach,  20  Fed.  Rep.  47  (1884).  These  cases  in- 
volved the  title  to  patents  obtained  by  a  partner  in  his  own 
name  at  the  expense  of  his  firm  on  his  own  inventions.  It  has 
been  decided  that even  where  a  partner  has  agreed  to  give  his 
whole  time  to  the  business  of  his  firm  he  has  the  exclusive  title 
to  inventions  devised  by  him  in  the  way  of  improving  machin- 
ery in  furtherance  of  the  business  of  the  firm.  Burr  v.  De  La 
Yergne.  102  X.  Y.  415  (1886);  Belcher  v.  Whittemore,  134  Mass. 
330  (1883). 

2  Person  v.  Wilson,  25  Minn.  189  (1878). 


JOINT  PROPERTY.  309 

ners,  was  captured  by  a  British  cruiser,  and  compensa-  Bk.  III. 
tion  was  made  to  the  Americans,  but  to  them  only,  the  Cbap.4.  >ect. 

Frenchman  being  expressly  excluded,  it  was  held  that  J 

the  sum  awarded  to  the  Americans  belonged  to  them 

alone,  and  that  the  Frenchman  had  no  interest  in  it  (I). 

So,  if  one  partner  is  *  the  lessee  of  property  to  which  [  *  326] 

the  firm  is  only   entitled  so   long  as  the  partnership 

continues,  and  on  the   dissolution   of   the  partnership 

the  lease  is  sold  or  renewed,  the  price  of  the  sold  lease, 

or  the  renewed  lease,  as  the  case  may  be,  will  belong, 

not  to  the  firm,  but  to  that  partner  in  whom  the  lease  is 

by  hypothesis  exclusively  vested  (m). 

As  regards  property  acquired  after  a  dissolution,  but  Property 
before  the  affairs  of  a  dissolved  partnership  have  been  acquired 
wound  up,  such  property  is  not  necessarily  to  be  con-  ^  ( 
sidered  as  partnership  property,  even  though  the  part- 
ner acquiring  it  has  continued  to  carry  on  the  business 
of  the  dissolved  firm  without  the  consent  of  his  late 
partners.  This  was  decided  in  Nerot  v.  Burnand  (n).  Nerot  v. 
In  that  case,  in  effect,  an  hotel-keeper  bequeathed  his  Buruanc  • 
business  to  his  son  and  daughter.  After  the  death  of 
the  testator,  the  daughter  continued  to  carry  on  the 
business.  She  afterwards  transferred  it  to  a  new  house 
in  Clifford  Street,  and  this  house  was  conveyed  to  her 
in  fee.  She  continued  to  carry  on  the  business  there 
for  some  time,  and  ultimately  she  married.  During 
the  greater  part  of  the  time  which  had  elapsed  since 
the  death  of  the  testator,  his  son  had  been  abroad,  and 
on  his  return  he  insisted  that  he  ought  to  be  consider- 
ed as  a  partner  with  his  sister,  and  that  as  such  he  was 
entitled  to  have  the  new  house  taken  by  her,  and  all 
the  stock  in  trade  and  effects  purchased  by  her  in  or- 
der to  carry  on  the  business,  treated  as  partnership 
property.  The  Vice- Chancellor  decided  that  the  testa- 
tor's son  and  daughter  had  become  partners,  but  that 
the  partnership  between  them  had  been  dissolved  on 
her  marriage.  He  also  held,  that  the  new  house,  and 
all  the  goods,  furniture,  plate,  linen,  china,  wines, 
stock-in-trade,  implements  and  other  effects,  being  in 
and  about  the  premises,  formed  a  part  of  the  partner- 
ship property.     Upon  appeal  this  decision  was  affirm- 

(?)  Campbell  v.  Mullett,  2  Swanst.  551.  See,  also,  Burnand 
v.  Rodocanaehi,  7  App.  Ca.  333;  Thompson  v.  Ryan,  2  Swanst. 
565,  n.;  Moffatt  v.  Farquharson,  2  Bro.  C.  C.  338.  See  the  note 
on  this  case  in  Belt's  edition  of  Brown's  Reports. 

(to)  See  Burdon  v.  Barkus,  3  Giff.  412,  aft*,  on  appeal,  4  De  G. 
F.  &  J.  42. 

(n)  4  Russ.  247,  and  2  Bli.  N.  S.  215.  See,  too,  Payne  v. 
Hornby,  25  Beav.  2ti(J. 


400 


PARTNERSHIP  PROPERTY, 


[  *  327] 


Nerot  v. 
Burnand 


Bk.  III.  ^  ed,  so  far  as  it  related  to  the  existence  and  subsequent 
Chap.  4.  Sect,  dissolution  of  partnership;  but  was  varied  so  far  as  it 
related  to  what  ought  to  be  considered  as  partnership 
property.  *Upon  this  head  the  Lord  Chancellor's 
judgment  was  as  follows: — 

"It  appears  to  me  satifactorily  made  out  from  all  the  circum- 
stances, that  the  house  in  Clifford  Street  was  bought  with  the 
partnership  property;  bought  in  the  first  instanee,  partly  with 
the  partnership  property,  partly  with  money  borrowed  by  Miss 
Nerot  and  afterwards  repaid  out  of  the  partnership  effects,  and 
partly  upon  the  credit  of  the  house  that  belonged  to  the  partner- 
ship, and  I  think  that  part  of  the  Vice-Chancellor's  decree  by 
which  he  directs  the  house  to  be  sold,  must  be  affirmed. 

"  There  is  a  part  of  the  decree,  however,  in  which  I  cannot 
concur.  The  dissolution  of  the  partnership  took  place  in  Sep- 
tember, 1819.  The  Vice-Chancellor  has  directed  all  the  property 
to  be  sold  which  was  in  the  house  in  Clifford  Street  at  the  time 
when  the  decree  was  pronounced,  several  years  after  the  dissolu- 
tion of  the  partnership,  as  if  all  the  property  which  at  the  time 
of  the  decree  existed  in  the  house  was,  without  enquiry,  to  be 
considered  as  partnership  property.  Lord  Eldon  doubted  greatly 
whether  that  part  of  the  decree  could  be  sustained;  and  in  my 
opinion  it  must  be  varied  by  directing  the  Master  to  take  an  ac- 
count of  the  particulars  of  the  partnership  property  which  were 
in  the  house  in  Clifford  Street  at  the  time  of  the  dissolution, and 
of  the  value  of  the  property  at  that  time;  and  to  enquire  whether 
any  part  of  that  property  still  remains  in  the  house  (o). 

The  goodwill  of  a  partnership,  in  so  far  as  it  has  a 
pecuniary  value,  is  partnership  property,  unless  the 
contrary  can  be  shown.  This  subject,  however,  will  be 
more  conveniently  discussed  hereafter,  when  treating 
of  partnership  articles  (p). 


Goodwill. 


2.  Property 
of  the  in- 
dividual 
partners. 


Section  II. — Separate  Estate. 

The  preceding  enquiry  into  what  constitutes  the 
property  of  the  firm,  has  rendered  it  unnecessary  to 
enquire  at  length  into  what  constitutes  the  separate 
property  of  its  members.  A  few  additional  observa- 
tions, pointing  out  the  danger  of  relying  too  much  on 
circumstances  which  are  often  regarded  as  decisive,  may, 
however,  be  usefully  added. 

(o)  See,  also,  Ex  parte  Morley,  8  Ch.  1026,  where  a  surviving 
partner  continued  the  business,  sold  the  old  stock  in  trade,  and 
it  was  held  that  the  new  stock  in  trade  formed  part  of  his  separate 
estate. 

(p)  See  infra,  book  iii.  ch.  9  §  2. 


SEPARATE  ESTATE.  401 

*It  by  no  means  follows  that  persons  who  are  part-  [  *  328] 
ners  by  virtue  of  their  participation  in  profits,  are  enti-  Bk.  III. 
tied  as  such  to  that  which  produces  those  profits.      For  ChaP-  4-  Sect. 

example,    coach -proprietors    who   horse    a    coach     and  J 

divide  the  profits,  may  each  make  use  of  horses  which  That  which 
belong  to  himself  alone  and  not  to  the  firm  of  proprie-  produces 
tors  (q).     So,  where  a  merchant  employs  a  broker  to  j^m^may 
buy  goods  for  him  and  to  sell  them  again  on  his  account,  belong  to' 
although   it  may  be  agreed  that  the  profits  are  to  be  one  partner 
divided,  the  goods  themselves,  and  the   money  arising  ouly- 
from  their  sale,  are  the  property  of  the  merchant,  and 
not  the  joint  property  of  himself  and  the  broker  (r); 
and  it  not  unfrequently  happens  that  dormant  partners 
have  no  interest  in  anything  except  the  profits  accruing 
to  the  firm  to  which  they  belong  (s). 

Again,  it  by  no  means  follows  that  property  used  by  Property- 
all  the  partners  for  partnership  purposes,  is  partner-  used  lor 
ship  property.     For  example,  the  house  and  land  in  PUrtnsrShnPt 
and  upon  which  the  partnership  business  is  carried  on,  necessarily 
often  belongs  to  one  of  the  partners  only,  either  subject  partnership 
to  a  lease  to  the  firm,  or  without   any  lease  at  all  (t).  property. 
So  it  sometimes  happens,  though   less  frequently,  that 
office  furniture  (u),  and  even  utensils  in  trade  (a?),  are 
the  separate  property  of  one  of  the  partners,  subject  to 
the  right  of  the  others  to  use  them  as  long  as  the  part- 
nership continues.     If,  however,  a  partner  brings  such 
property  into  the  common  stock  as  part  of  his  capital  it 
becomes  *  partnership  property,  and  any  increase  in  its  [  *  329] 
value  will  belong  to  the  firm  (y). 

It  does  not  even   necessarily  follow    that    property  Property 


(q)  As  in  Fromontr.  Coupland.  2  Bing.  170;  Barton  ?•.  Hanson, 
2  Taunt.  49.  and  see  Wilson  v.  Whitehead,  10  M.  &  W.  503,  as 
to  an  author's  interest  in  paper  supplied  for  this  work  to  the  pub- 
lisher. 

(>■)  Smith  r.  Watson,  2  B.  &  C.  401;  Meyer  v.  Sharp,  5  Taunt. 
74;  Burnell  v.  Hunt,  5  Jur.  6.50,  Q.  B. 

(s)  See  Ex  park  Hamper,  17  Yes.  404,  405;  Ex  parte  Chuck, 
Mont.  373. 

t  s,-e  Burdon  v.  Barkus,  3  Giff.  412,  aff.  on  appeal,  4  DeG.  F. 
&  J.  42,  as  to  a  lease  of  a  coal  mine:  Ex  parte  Murton,  1  M.  D. 
&  D.  25-2;  Balmain  v.  Shore,  9  Yes.  500;  Rowley  v.  Adams,  7 
Beav.  548;  Doe  v.  Miles.  1  Stark.  181,  and  4  Camp.  373.  If  there 
is  no  lease  and  the  firm  is  dissolved,  the  owner  can  eject  his  late 
partners  without  notice  to  quit.  Doe  v.  Bluck,  8  C.  &  P.  464; 
Benham  v.  Cray,  5  C.  B.  138  'an  action  of  trespass).  As  to  an 
injunction  in  such  cases,  see  Elliot  v.  Brown,  3  Swanst.  489,  a.; 
Haw  kins  v.  Hawkins,  4  Jur.  X.  S.  1044,  Y.-C.  Stuart. 

u  i  Ex  parte  Owen,  i  De  G.  &  Sm.  351.  See  Ex  parte  Hare,  1 
Deac.  16;  Ex  parte  Mutton,  1  M.  D.  &  D.  252. 

(x)  Exparte  Smith,  3  Madd.  63. 

(■y)  Robinson  v.  Ashton,  20  Eq.  25. 

*  3   LAW   OF    PARTNERSHIP. 


and  furni 
ture 


402  PARTNERSHIP  PROPERTY. 

Bk.  III.  bought  with  the  money  of  the  firm  is  the  property  of 

Chap.  4.  Sect.  ^e    grm        por  ft  sometimes  happens  that  property, 

J although  paid  for  by  the  firm,  has  been,  in  fact,  bought 

bought  with    for  one  partner  exclusively,   and  that  he  has  become 
the  money  of  debtor  to  the  firm  for  the  purchase  money  (z). 

It  is  obvious,  therefore,  that  the  only  true  method  of 
Agreement      determining  as  between  the  partners  themselves  what 
partners  the    belongs  to  the  firm,  and  what  not,  is  to  ascertain  what 
true  test.         agreement  has  been  come  to  upon  the  subject.      If  there 
is  no  express  agreement,  attention  must  be  paid  to  the 
source  whence  the  property  was  obtained,  the  purpose 
for  which  it  was   acquired,  and  the  mode  in  which  it 
has  been  dealt  with.      The  following  cases,  in  which 
there  was  very  little  evidence  to  show  what  agreement 
had  been  made,  may  be  usefully  referred    to  on  this 
subject. 
Ex  parte  In  Ex  parte  Owen  (a)  one  Bowers,  who  was  a  grocer, 

Owen.  provision  dealer,  and  wine  merchant,  and  who  possessed 

Stock  in  trade  stock  in  trade  and  household  furniture  at  his  place  of 
business,  took  two  partners,  without  any  agreement 
except  that  they  were  to  participate  in  the  profits  of  the 
concern.  They  brought  in  no  capital  and  paid  no 
premium,  and  no  deed  or  agreement  was  executed. 
Bowers  bought  with  his  own  money,  but  in  the  name 
of  the  firm,  new  stock  required  for  the  business.  Upon 
the  bankruptcy  of  the  firm,  the  question  arose  to  whom 
the  stock  in  trade  and  furniture  belonged.  The  Court, 
coming  to  the  best  conclusion  it  could  from  such  ma- 
terials as  were  before  it,  held  that  there  was  an  agree- 
ment between  the  three,  expressed  or  implied,  that  all 
the  stock  in  trade  should  become  the  property  of  the 
[  *  330]  three,  subject  to  an  account,  in  *which  the  partnership 
would  be  debited  in  favour  of  Bowers  for  the  value  of 
the  articles  which  belonged  to  him  or  for  which  he  paid. 
But  the  Court  thought  there  was  not  the  same  ground 
for  such  an  inference  as  to  the  household  furniture, 
and  that  therefore  was  held  to  have  continued  and  to 
remain  the  separate  estate  of  Bowers. 
Outlays  on  Sometimes  a  firm  lays  out  money  on  property  which 

property.  belongs  exclusively  to  one  partner  ;  or  some  of  the 
partners  lay  out  their  own  monies  on  the  property  of 
the  firm  ;  and  in  such  cases  the  question  arises  whether 

~ (zfSee  Smith  v.  Smith,  5  Ves.  193  :  Walton  r.  Butler,  29 
Beav.  428;  Ex  parte  Emly,  1  Rose,  64.  Compare  the  case  of  the 
Bank  of  England,  3  De  G.  F.  &  J.  645.  noticed  infra,  p.  330. 

(n)  4  De  G.  &  Sm.  351.  See,  also.  Pilling  v.  Pilling,  3  De  G. 
J.  &  S.  162.  As  to  a  lease  of  saltworks  belonging  originally  to 
one  partner,  but  which  became  the  property  of  the  linn,  Parker 
v.  Hills-,  5  Jur.  N.  S.  bU9,  and  on  appeal,  7  ib.  833. 


SEPARATE  ESTATE.  403 

the  money  laid  out  can  be  considered  as  a  charge  on  Bk.  III. 
the  property  on  which  it  has  been  expended,  or  whether  Cnap.  4.  Sect. 

the  owners  of  the  property  obtain  the  benefit  of  the  J 

outlay.  The  agreement  of  the  partners,  if  it  can  be 
ascertained,  determines  their  rights  in  such  cases. 
But  where,  as  often  happens,  it  is  extremely  difficult, 
if  not  impossible,  to  ascertain  what  was  agreed,  the 
only  guide  is  that  afforded  by  the  burden  of  proof.  It 
is  for  those  claiming  an  allowance  in  respect  of  the  out- 
lay to  establish  their  claim.  On  the  other  hand  an  in- 
tention to  make  a  present  of  a  permanent  improvement 
is  not  to  be  presumed.1 

In    Re    Streatfield,  Laurence,  &  Company  (&),  two  streatfield, 
partners  bought  an    estate  with    partnership    money.  Lawrence,  & 
The  land  was  conveyed  to  them  in  uudivided  moieties  Co- 
to  uses  to  bar  dower,  and  each  partner  built  a  house  on  H<>uses  built 
the  land  with  money  of  the  firm,  but  charged  to  him  in  ^^ 
his  private  account.      An  account  was  opened  in  the  property, 
partnership  books,  and  in  this  account  the  purchased 
estate  was  debited  with  all  monies  of  the  partnership 
expended  in  the  purchase.     At  the  time  of  the  purchase 
the  land  was  in  lease,  but  the  tenant  surrendered  to  the 
partners  those  portions  which  they  wanted,  they  reduc- 
ing his  rent.     The  rents,   viz.,  both  that  paid  by  the 
tenant  for  what  he  held,  and  that  paid  to  him  for  what 
he  gave  up,  were  treated  in  the  books  of  the  firm  as  paid 
to  and  by  it.      There  was  evidence  to  show  that  the 
partners  intended  to  come   to  some  arrangement    re- 
specting the  division  of  the  estate,  but  *they  became  [  *  331] 
bankrupt  before  doing  so.     It  was  held  that  both  the 
land  and  the  houses  on  it  were  the  joint  property  of  the 
firm,  and  not  the  separate  properties  of  the  partners. 

(b)  Bank  of  England  case,  3  De  G.  F.  &  J.  645.  In  Pawsey  v. 
Armstrong,  18  Ch.  D.  698,  an  inquiry  was  directed  as  to  build- 
ings paid  for  out  of  partnership  moneys,  but  erected  on  the 
separate  propertv  of  one  of  the  partners.  See,  also,  Burdon  v. 
Barkus,  3  Girl".  412,  and  4  De  G.  F.  &  J.  42,  where  a  pit  was 
sunk  by  the  firm  in  a  partner's  property. 

1  A.  contributed  certain  real  estate  to  the  firm  of  A.  and  B.  at 
a  valuation  and  was  credited  with  its  value  on  the  books  of  the 
partnership  ;  but  he  reserved  the  right  to  withdraw  the  property 
on  dissolution  at  the  valuation  at  which  he  had  contributed  it. 
The  buildings  on  the  premises  were  destroyed  by  fire  during  the 
continuance  of  the  firm  and  the  firm"s  money  was  used  to  re- 
build them.  The  property  rose  in  value  and  on  dissolution 
A.  attempted  to  exercise  the  right  he  had  reserved,  paying  the 
additional  cost  of  building,  but  it  was  held  that  he  could  not  do 
so,  as  by  permitting  the  destroyed  buildings  to  be  erected  at  the 
firm's  expense  lie  had  waived  his  right,  and  that  the  accretions 
in  value  belonged  to  the  firm.  Clark's  Appeal,  72  Fa.  St.  142 
(1872). 


404  PARTNERSHIP  PROPERTY. 

Bk.  III.  In  Collins  v.  Jackson  (c),  two  persons  were  in  part- 

Chap.  4.  Sect,  nership  as  solicitors,  and  one  of  them  held  several  ap- 
^ pointments  ;  he  was  clerk  to  poor  law  guardians,  super- 
Collins  v.  intendent  registrar  of  births,  marriages  and  deaths, 
Jackson.  treasurer  of  a  turnpike  trust,  steward  of  a  manor, 
Appoint-  treasurer  of  a  charity,  and  receiver  of  tithes.  The 
ments"  question  arose  whether  the  profits  of  these  offices  be- 

longed to  tbe  partnership  or  not.     There  was  no  writ- 
ten agreement  specifically  applying  to  these  offices,  but 
there  was  a  memorandum   relating  to  some  others  re- 
served by  the  father  of  one  of  the  partners  when   he 
retired  from  business,  and  the  Master  of  the  Rolls  held 
that  all  the  offices  in   question   were  to  be  treated   as 
held  on  behalf  of  both  partners,  and  not  for  the  exclu- 
sive benefit  of    the    partner    who    actually    filled   the 
offices  (d).1 
Cases  where        The   cases,  however,  which  present  most  difficulty, 
co-owners       are  those  in  which  the  co-owners   are  partners   in  the 
share  profits,  profits  derived  from  their  common  property  (e).     Sup- 
pose, for  example,  that  two  or  more  joint  tenants,  or 
tenants   in  common,  of  a  farm   or  a  mine,  work  their 
common  property  together  as  partners,  contributing  to 
the  expenses  and  sharing  all  profits  and  losses  equally, 
there  will  certainly  be  a    partnership  ;  and  yet,  unless 
there  is  something  more  in  the   case,  it  seems  that  the 
land  will  not  be  partnership   property,  but  will  belong 
to  the  partners  as  co-owners,  just  as  if  they  were  not 
partners  at  all  (/)  :  and  the  result  may  even  be  the 
same  if  they  purchase  out  of  their   profits  other  lands 
for  the  purpose  of  more  conveniently  developing  their 
business  (g). 

(c)  31  Beav.  645. 

(rf)  See,  also,  Smith  v.  Mules,  9  Ha.  556  ;  and  Ambler  v.  Bol- 
ton, 14  Eq.  427,  as  to  the  mode  of  dealing  with  such  offices  on  a 
dissolution. 

(e)  As  to  the  distinction  between  co-ownership  and  partner- 
ship, see  ante,  p.  51,  et  seq. 

(/)  See  Crawshay  v.  Maule,  1  Swanst.  523  ;  and  Roberts  r. 
Eberhardt,  Kay,  159.  See,  also,  Williams  v.  Williams,  2  Ch. 
294,  where  the  partnership  had  expired,  but  an  agreement  to 
divide  the  property  was  held  to  have  been  come  to. 

(g)  Steward  v.  Blakeway,  4  Ch.  603,  and  6  Eq.  479,  a  case  of 
a  farm  and  quarry.  But  compare  Morris  v.  Barrett,  Phillips  v. 
Phillips,  and  Waterer  v.  Waterer,  cited  below. 

1  A  similar  question  arose  in  Caldwell  v.  Leiber,  7  Paige,  483 
(1839),  where  A.,  a  partner  in  A.  and  B..  Avas  appointed  deputy 
postmaster,  the  post-office  being  in  the  store  of  the  firm  and  the 
deputy's  duties  being  performed  by  the  firm's  clerks.  It  was 
there  held  that  the  emoluments  of  the  office  were  not  A.  'sseparate 
property,  but  belonged  to  the  firm. 


SEPARATE  ESTATE. 


405 


In  jrnrris  v.  Barrett  (h)  lands  were  devised    to    two  Bk.  III. 
persons  *  as   joint  tenants.     They  farmed  those   lands  ^haP-  4-t>ect- 

together  for  twenty  years,  and  kept  their  money  in  one  7  

common  stock  to  which  each  had  access,  but  they  never  L  r*ZJ 
came  to  any  account  with  each  other.  Out  of  their  ^J.^ 
common  stock  they  bought  other  lands,  which  were  by  (levise 
conveyed  to  one  of  them  only,  but  were  farmed  by  both,  farmed  in 
like  the  first  lands.  It  was  held  that  the  devised  farms  common. 
were  not  partnership  property,  but  that  the  purchased  "J™**- 
farms  were. 

In  Broicn  v.  Oakshot  (i)   a  brewer   devised  his  real  Joint  tenants 
estates  to  trustees   for  a  term  of   500  years,  upon  trust,  by  devise 
to  pay  certain  annuities,  and    to    divide   the   surplus  J^J.^rs  m 
rents  between   his  sons,  and  he  devised  the  same  estates  grownv 
subject  to  this  term   to  his  sons  as  joint  tenants.     The  0aksnot; 
sons  carried  on  their  father's  business    in    partnership 
together,  and  used  the  real  estates  devised  to  them   for 
the    purpose  of  the-  business ;  but  it  was  nevertheless 
held  that  the  reversion  in  fee  continued  to  be  vested  in 
them  jointly,  and  not  in  common,  as   would  have  been 
the  case  had  it  become  partnership  property. 

In  Phillips  v.  Phillips  (k)  public-houses  were  devised  Public- 
to  two  persons  who  carried  on   a   brewery    in    partner-  J?11^*6- 
ship,  and  it  was  held  that  such  houses  did  not    become  ^tneTS  in  a 
partnership  property,  though  used  for  the  purposes   of  oreWery. 
the  partnership.     In   the    same  case   some    mortgage  Phillips  »• 
debts  secured  on  public- houses  were  bequeathed  to  the  Phillips, 
two  partners,  and  they  afterwards  purchased  the  equi- 
ties of  redemption,  and  paid  for  them  out  of  the  funds 
of  the  partnership,  but  it  was  held  that  the  property 
thus  acquired  did  not  form  part   of    the   partnership 
property,   the    equities    of    redemption    following  the 
mortgage  debts.     But  in  this  very  case  it  was  held  that 
oiher  public  houses  purchased  by  the  partners   out  of 
the  partnership  funds,  and  used  for  the  purposes  of  its 
trade,  did  form  partnership  property  to  all  intents  and 
purposes  (I). 

On  the  other  hand,  in  Jackson  v.  Jackson  (m),  a  tes-  Devisees  of  a 

(/,)  3  Y.  &  J.  384.     Compare  Waterer  v.  Waterer,  infra,  p.  333 
(i)  24  Beav.  254. 

(k)  As  stated  in  Bisset  on  partnership,  p.  50.  The  report  in 
1  M.  &  K.  049,  is  silent  as  to  the  property  devised.  Mr.  Bisset 
considers  the  decision  as  an  authority  on  the  point  of  conver- 
sion. But  if,  as  he  represents,  the  Court  came  to  the  conclusion 
that  the  devised  property  was  not  in  fact  partnership  property. 
the  question  of  conversion  would  not  arise.  Compare  Waterer 
v.  Waterer,  15  Eq.  402,  infra. 

(1)  1  M.  &  K,  649. 

(m)  9  Ves.  591,  and  7  ib.  535.  Compare  this  with  Brown  v. 
Oakshot,  24  Beav.  254,  noticed  supra. 


406 


PARTNERSHIP  PROPERTY. 


[*333] 

Bk.  III. 
Chap.  4.  Sect. 
2. 

trade  and  of 
laud  for  the 
purpose  of 
carrying  it 
on. 

Jackson  v. 
Jackson. 


Devisees  of 
mines. 
Crawshay  v. 
Maule. 


Devise  of 
nursery 
grounds. 
Waterer  v. 
Waterer. 


Land  acquir- 
ed for  the 
purposes  of 
trade. 


[  *  334] 


tator  had  *  devised  to  his  two  sons  jointly,  his  trading 
business  and  lands  used  by  him  for  the  purpose  of  car- 
rying it  on.  The  sons  took  the  business  and  carried  it 
on  in  partnership  ;  and  it  was  held  that  the  lands  form- 
ed part  of  the  partnership  property,  and  did  not  belong 
to  the  sons  as  mere  joint  tenants.  In  this  case,  not 
only  was  there  some  evidence  to  show  that  the  sons 
considered  the  land  as  part  of  their  property  as  part- 
ners, but  there  was  also  this  peculiarity,  that  a  trading 
business  was  left  to  them,  and  that  the  land  was  acces- 
sory to  that  trade  ;  so  that  it  was  very  difficult,  as  ob- 
served by  the  Lord  Chancellor,  to  sever  the  profits  from 
the  land  and  to  hold  the  devisees  to  be  partners  as  to 
the  former,  but  not  as  to  the  latter. 

Upon  this  last  ground  it  was  held  in  Craiushay  v. 
Maule  (n),  that  mines  devised  to  several  persons  for 
the  express  purpose  of  being  worked  by  them  in  part- 
nership, and  which  were  worked  accordingly,  were 
partnership  property. 

In  Waterer  v.  Waterer  (o),  a  nurseryman  who  car- 
ried on  business  with  his  sons,  although  not  in  part- 
nership, left  his  residuary  estate,  including  the  good- 
will of  his  business,  to  his  sons  in  common;  they, 
after  his  death,  carried  on  the  business  in  partnership, 
and  bought  more  land  for  the  purposes  of  the  busi- 
ness, and  paid  for  it  out  of  his  estate;  then  one  son 
died,  and  the  others  bought  his  share  and  paid  for  it 
out  of  money  raised  by  mortgage  of  the  nursery  ground, 
and  out  of  their  father's  estate.  On  the  death  of  one 
of  the  surviving  sons  intestate,  it  was  held  that  all  the 
land  thus  acquired  had  become  partnership  property, 
and  that  the  share  of  such  son  was  to  be  treated  as 
personal  and  not  as  real  estate. 

By  a  slight  extension  of  the  same  principle,  if  sev- 
eral persons  take  a  lease  of  a  colliery,  in  order  to  work 
the  colliery  as  partners,  and  they  do  so  work  it,  the 
lease  will  be  partnership  property  (p).  So,  if  co-own- 
ers of  land  form  a  partnership,  and  the  land  is  merely 
accessory  to  their  trade,  and  is  treated  as  part  of  the 
common  stock  of  the  firm,  the  land  will  be  partnership 
property  (q). 

*  Upon  the  whole,  therefore,  it  seems  that  land  ac- 

(n)  1  Swanst.  495. 

(o)  Waterer  v.  Waterer,  15  Eq.  402.  See,  also,  Davies  v. 
Gaiues,  12  Ch.  D.  813,  a  similar  case. 

(p)  Faraday  v.  Wightwiek,  Taml.  250,  and  1  R.  &  M.  45. 
See  Beutley  v.  Bates,  4  Y.  &  C.  Ex.  182. 

(q)  Essex  v.  Essex,  20  Beav.  442.  Compare  Steward  v.  Blake- 
way,  4  Ch.  603,  and  6  Eq.  479. 


CONVERSION  OF  JOINT  ISTO  SEPARATE  PROPERTY.  407 

quired,  whether  gratuitously  or  not,  for  the  purpose  of  Bk.  III. 
carrying  on  a  partnership  business,  and  used  for  that  Chap.  4.  Sect. 

purpose,  is  to  be  considered  as  property  of  the  partner-  _! 

ship;  but  that  land  which  is  not  so  acquired,  but  which  Result  of 
belonging  to  several  persons  jointly  or  in  common,  is  i°reg°ing 
employed  by  them  for  their  common  profit,  does  not  be- 
come partnership  property  unless  there  is  some  evi- 
dence to  show  that  it  has  been  treated  by  them  as  an- 
cillary to  the  partnership  business,  and  as  part  of  the 
common  stock  of  the  firm  (r).1 


Section  III. — Conversion  of  Joint  Estate  into  Sepa- 
rate Estate,  and  Vice  Versa. 

It  is  competent  for  partners  by  agreement  amongst  3.  Agreement 
themselves  to  convert  that  which-  was  partnership  pro-  sufficient  to 
perty  into  the  separate  property  of  an  individual  part-  *ownership  0f 
ner,  or  vice  versQ,  (s).2     And  the  nature  of  the  property  property, 
may  be  thus  altered  by  any  agreement   to  that  effect; 
for  neither  a  deed  nor  even  a  writing  is  absolutely  nec- 

(>•)  See  Steward  v.  Blakeway,  4  Ch.  603,  and  6  Eq.  479,  and 
cases  ante,  p.  332. 

(.s)  Ex  parte  Ruffin,  6  Ves.  119;  Ex  ■parte  Williams,  11  ib.  3; 
Ex  parte  Fell,  10  ib.  348;  Ex  parte  Rowlandson,  1  Rose,  416. 

1  Tbe  whole  question  is  one  of  intention;  save  that  in  Penn- 
sylvania in  order  that  this  intention  shall  be  binding  on  others 
beside  the  partners  themselves  it  must  be  in  writing  and  those 
■writings  properly  recorded.  Hale  v.  Henrie,  2  Watts,  143 
(1834);  DuBree  v.  Albert,  100  Pa.  St.  483  (1882);  Kepler  v.  Erie 
Dime  Sav.  &  Loan  Co.,  101  Pa.  St.  602  (1882);  Shafer's  Appeal, 
106  Pa.  St.  49  (18-84).  The  mere  fact  that  A.  and  B.  who  are 
partners  hold  land  together  does  not  stamp  the  land  as  partner- 
ship property.  It  must  be  shown  it  was  acquired  for  partner- 
ship purposes.  Thompson  v.  Bowman,  6  Wall.  316  (1867).  Kor 
does  it  prove  the  land  partnership  property  if  in  such  a  case  the 
joint  owners  use  it  in  the  transaction  of  the  firm's  business,  as 
where,  for  example,  A.  and  B.  bought  land  together,  built  upon 
it  and  subsequently  carried  on  a  boarding  house  upon  the  prem- 
ises; Sikes  r.  Work,  6  Gray,  433  (1856):  and  in  Coles  v.  Coles.  15 
Johns.  159  (1817),  the  fact  that  the  owners  of  a  distillery  were  the 
partners  in  the  business  carried  on  in  the  property  did  not,  it 
was  held,  establish  tbe  claim  that  the  premises  were  the  prop- 
erty of  the  firm.  In  Louisiana  where  partners  in  a  commercial 
firm  own  land,  it  is  always  regarded  as  separate  property  of 
which  they  are  tenants  in  common,  and  it  is  not  regarded  as 
part  of  the  firm's  assets.  Guilbian  v.  Melancon,  28  La.  Ann. 
627  (1876). 

2  Whitworth  v.  Benbow.  56  Ind.  194  (1877);  Bullitt  v.  Church, 
26  Pa.  St.  108  (1856);  Dimon  r.  Bazzard,  32  N.  Y.  65  (1865); 
Evans  v.  Hawley,  35  Iowa,  83  (1872);  Bank  v.  West,  46  Me.  15 
(1858);  (.illisso  v.  Gibson,  0  La.  Ann.  125  (1851). 


408  PARTNERSHIP  PROPERTY. 

Bk.  III.  essary  (f)1  ;  but  so  long  as  the  agreement  is  depend- 

Chap.  4.  Sect.  en^.  on  an  unperformed  condition,  so  long  will  the  own- 

J ership  of  the  property  remain  unchanged  (u).2 

Creditors  not      Moreover,  as  the  ordinary  creditors  of   an  individual 
entitled  to  be  ^ave  no  \[en  OI1  h.js  property,  and  cannot   prevent  him 
consu   e  .       from   disposing  of  it   as  he  pleases,    so   the  ordinary 
creditors  of  a  firm  have  no  lien  on  the  property  of  the 
firm  so  as  to  be  able  to  prevent  it  from  parting  with 
[  *  335]        that  property  to  whomsoever  it  *  chooses.8      Accord- 
ingly   it    has  frequently  been    held,   that  agreements 
come  to  between  partners  converting  the  property  of 
the  firm  into  the  separate  estate  of  one  or  more  of  its 
members,  and  vice  versa,  are,  unless  fraudulent,  bind- 
ing not  only  as  between   the  partners  themselves,  but 
also  on  their  joint  and  on  their  respective  several  cred- 
itors; and  that,  in  the  event  of  bankruptcy,  the  trus- 
tees must  give  effect  to  such  agreements  (x). 

(t)  See  Pilling  v.  Pilling,  3  De  G.  J.  &  Sm.  162;  Ex  parte 
"Williams,  11  Vas.  3;  Ex  parte  Clarkson.  4  D.  &  C.  56,  per  Sir  G. 
Rose;  Ex  parte  Owen,  4  De  G.  &  Sm.  351.  None  of  these  eases. 
however,  turned  on  the  effect  of  an  unwritten  agreement  relat- 
ing to  land.  See,  as  to  a  transfer  by  a  partner  of  his  shares  in 
the  partnership  property  when  it  consists  wholly  or  in  part  of 
land,  post,  ch.  5,  \  5. 

(u)  Ex  parte  Wheeler,  Buck.  25;  Ex  parte  Cooper,  1  M.  D.  & 
D.  358;  Hawkins  r.  Hawkins,  4  Jur.  N.  S.  1044. 

(x)  See  E.c  parte  Ruffin,  and  the  other  cases  cited   in  the  last 


1  In  Jones  v.  Neale,  2  Patt.  &  H.  (Va.)  339(1856),  it  was  held 
that  a  mere  agreement,  unsealed  and  unrecorded,  that  real  es- 
tate shall  be  the  separate  property  of  one  partner  is  inoperative. 

2  Fitzgerald  v.  Cross,  20  N.  J.  Eq.  90(1869). 

3  See  Locke  v.  Lewis.  124  Mass.  1  (1878);  Case  v.  Beauregard, 
99  U.  S  119(1878);  State  v.  Thomas,  ?  Mo.  App.  205  (1879); 
Allen  r.  Center  Valley  Co.,  21  Conn.  130  (1851);  Shackleford  v. 
Shackleford,  32  Graft'  481  (1879);  Miller  v.  Price,  20  Wis.  117 
(1865);  Fitzpatrick  v.  Flannagan,  106  U.  S.  648  (1882);  Foster 
v.  Barnes,  81  Pa.  St.  377  (1876);  Strauss  r.  Frederick.  91  N.  Ca. 
121  (1884).  In  New  Hampshire  it  has  been  held  that,  creditors 
have  rights  over  the  assets  of  the  firm  independent  of  the  equi- 
ties of  the  partners.  Ferson  r.  Monroe,  21  N.  H.  462  (1850); 
Benson  v.  Ela,  35  N.  H.  402  (1857);  Tenney  v.  Johnson,  43  N. 
H.  144  (1861).  And  in  Conroy  v.  Woods,  13  Cal.  626  (1859),  it 
was  held  that  where  one  partner  buys  out  his  associates  upon 
the  agreement  to  pay  the  firm  debts,  the  partnership  creditors 
have  a  priority  over  his  separate  creditors  to  the  extent  of  the 
firm  assets;  but  this  doctrine  is  denied  in  City  of  Maquoketa  v. 
Willey,  35  Iowa,  3-23  (1872);  see  Baker's  Appeal,  21  Pa.  St.  77 
(1853).  Transfers  of  firm  property  to  an  individual  partner  have 
been  held  void  as  against  partnership  creditors  without  notice 
for  the  want  of  a  change  in  possession.  Moline  Wagon  Co.  v. 
Rummell,  2  McCrarv.  307,  12  Fed.  Rep.  658  (1880);  14  Id.  155 
(1882);  Newell  r.  Desmond,  63  Cal.  242  (1863,;  Criley  v.  Vasel, 
52  Mo.  455  (1873). 


CONVERSION'  OF  JOINT  INTO  SEPARATE  PROPERTY.  409 

A  conversion  of  joint  into  separate  property,  or  vice  Bk-  HI. 
versd,  most  frequently  takes  place  when  a  firm  aDd  one  ^haP-  4  Sect- 

of  its   partners   carry   on   distinct  trades  ;    or  when    a  J 

change  occurs  in  a  firm  by  the  retirement  of  some  or 
one  of  its  members,  or  by  the  introduction  of  a  new 
partner. 

When  a  firm  and  one  of  its  members  carry  on  dis   Dealings  be- 
tinct  trades,  property  passing  in  the  ordinary  way  of  tween  one 
business  from  the  partner  to  the  firm,  ceases  to  be  his  5j*rt]?er  aud 
and  becomes  the  property  of  the  partnership,  and  vice 
versa,  just  as  if  he  were  a  stranger  to  the   firm.      This 
was  settled  in  the  great  case  of  Bolton  v.  Puller(y),  in  Bolton  v. 
which  there  were  two  banking  firms,  one  carrying  on  Puller- 
business  at  Livei-pool  aud  one  in  London.      All  the  part- 
ners in  the   latter  firm   were  partners  in   the   former. 
Some  bills  of  exchange  came  in  the  ordinary  course  of 
business  into  the   hands  of  the   Liverpool  firm,  to  be 
placed  to  the  general  account  of  its  customers.     These 
bills  were  remitted  by  the  Liverpool  firm  to  the  Lon- 
don firm,  to  be  placed  to  the  credit  of  the  former  in 
the  general   account   between  the  two  houses.      Both 
houses  afterwards  becoming  bankrupt,  it  was  held  that 
the  bills  were  the  property  of  the  London  firm  and  not 
of  the  Liverpool  firm,  or  of  its  customers.      Lord  C.  J. 
Eyre,  in  delivering  judgment,  adverted  to  the  question 
now  under  consideration  in  the  following  terms  : — 

"There  can  be  no  doubt  that  as  between  themselves  a  part- 
nership may  have  transactions  with  an  individual  partner  or 
with  two  or  more  of  the  partners  having  their  separate  estate  en- 
gaged in  some  joint  concern  in  which  the  general  partnership  is 
not  interested  ;  and  that  they  may  by  *  their  acts  convert  the  [  *  336] 
joint  property  of  the  general  partnership  into  the  separate  prop- 
erty of  an  individual  partner,  or  into  the  joint  property  of  two 
or  more  partners,  or  c  converso.  And  their  transactions  in  this 
respect  will,  generally  speaking,  bind  third  persons,  and  third 
persons  may  take  advantage  of  them  in  the  same  manner  as  if 
the  partnership  were  transacting  business  with  strangers:  for 
instance,  suppose  the  general  partnership  to  have  sold  a  bale  of 
goods  to  the  particular  partnership,  a  creditor  of  the  particular 
partnership  might  take  those  goods  in  execution  for  the  sep- 
arate debt  of  that  particular  partnership." 

Where  a  change  occurs  in  a  firm  by  the  retirement  of  Change  of 
one  or  more  of  its  members,  nothing  is  more  common  property  on 
than  for  the  partners  to  agree  that  those  who  continue  g^"e  ln 

two  notes,  and  Campbell   v.  Mullett,   2    Swanst.    ".75;   Ex  parte 
Clarkson,   I  I).  &  Ch.  56;  Ex  parte  Pcake,  1  Madd.  358. 
(y)  1  Bos.  &  P.  539. 


410  PARTNERSHIP  PROPERTY. 

Bk.  III.  the  business  shall  take  the  property  of  the  old  firm  and 

Chap.  4.  Sect.  pay  ^ts  aeDts,  or  that  part  of  the  property  of  the  old 

firm  shall  become  the  property  of  those  by  whom  its 

business  is  to  be  continued,  whilst  the  rest  of  the  prop- 
erty shall  be  otherwise  dealt  with.  So,  again,  when  a 
partnership  is  first  formed,  or  when  a  new  partner  is 
taken  into  an  existing  firm,  or  when  two  firms  amalga- 
mate into  one,  some  agreement  is  generally  come  to  by 
which  what  was  before  the  property  of  some  one  or 
more  only  of  the  members  of  the  firm,  becomes  the 
joint  property  of  all  such  members.  All  such  agree- 
ments, if  bond  fide,  and  not  fraudulent  against  credit- 
ors, are  valid,  and  have  the  effect  of  altering  the  equi- 
table ownership  in  the  property  affected  by  them  (z).1 
Ex  parte  In  Ex  parte  Ruffin  (a),  which  is  the  leading  case  on 

Euffiu.  thjg  subject,   Thomas  Cooper,   a  brewer,    took    James 

Cooper  into  partnership.      That  partnership  was  after- 
wards dissolved  by  articles,  by  which  the    buildings, 

(z)  Such  an  agreement  is  not  a  breach  of  a  covenant  not  to  as- 
sign without  the  consent  of  the  lessor.  See  Corporation  of  Bris- 
tol ».  Westcott,  12  Ch.  D.  461  ;  Varley  v.  Coppard,  L.  R.  7  C. 
P.  505. 

(a)  6  Ves.  119.  See,  too.  Ex  parte  Walker.  4  De  G.  F.  &  J. 
509  ;  Ex  parte  Sprague,  4  De  G.  M.  &  G.  866;  Ex  parte  Clark- 
on,  4  D.  &  Ch.  56  ;  Ex  parte  Gurney,  2  M.  D.  &  D.  541  ;  Ex 
parte  Peake,  1  Madd.  346  :   Ex  parte  Fell,  10  Ves.  348. 

1  The  retiring  partner  who  assigns  his  interest  in  the  firm  as- 
sets to  his  associates  who  continue  the  business  in  consideration 
of  their  agreement  to  pay  the  old  firm's  debts  has  no  lien  upon 
the  property  of  the  old  firm  and  loses  his  right  over  it  as  a  part- 
ner. Those  assets  become  the  separate  property  of  the  contin- 
uing partners.  This  is  true  also  where  a  stranger  buys  the  re- 
tiring partner's  interest  and  forms  a  new  partnership  with  the 
continuing  partner  and  the- new  firm  assumes  the  payment  of 
the  old  firm'  debts  in  consideration  of  the  transfer  of  the  assets. 
Baker's  Appeal.  21  Pa.  St.  76  (1853);  Clarke's  Appeal.  107  Pa. 
St.  426  (1884);  Vosper  v.  Kramer,  31  N.  J.  Eq.  420  (1879); 
Maqnoketaw.  Willev,  35  Iowa,  323  (1872);  Howe  v.  Lawrence.  !) 
Cush.  553  (1852);  Goembell  v.  Arnett,  1C0  111.  34  (1881);  Emer- 
son v.  Parsons.  46  N.  Y.  560  (1871):  Trentman  v.  Swartzell,  85 
Ind.  443  (1882);  Allen  r.  Grissom.  90  N.  Ca.  90  (1*84):  Utley  v. 
Smith,  24  Conn.  290  (1855);  Ackley  v.  Winkelmeyer,  56  Mo. 
562  (1874).  It  is  said,  however,  that  the  partner's  lien  in  the 
cases  above  referred  to  may  be  preserved  by  express  agreement 
Savage  r .  Carter.  9  Dana  408  (1840):  Rogers  v.  Nichols,  20  Texas. 
719  (1858).  Where  the  purchaser  agrees  to  pay  the  debts  of  the 
old  firm  out  of  the  assets  he  received,  the  partner  may  insist  on 
the  application  of  the  proceeds  of  those  assets  to  the  extinguish- 
ment of  his  firm's  indebtedness,  Shackleford  v.  Shackleford,  32 
Graft,  481  (1879);  Kelsey  v.  Hobby,  16  Pet.  269  (1842);  Harmon 
v.  Clark,  13  Gray.114  (1859).  Where  such  a  right  is  reserved  by 
a  partner,  it  extends  to  the  whole  of  the  assets  of  his  firm  and 
not  merely' to  his  proportion  thereof.  Northrup  v.  McGill,  27 
Mich.  234(1873). 


CONVERSION  OF  JOINT  INTO  SEPARATE   PROPERTY.  411 

premises,   stock  in  trade,  debts,   and  effects  were    as-  Bk.  III. 
signed  to  James  by  Thomas,  who  retired.      James  after-  Chap.  4.  Sect. 

wards  became  bankrupt,  and  some  of  the  partnership  J 

debts  being  unpaid,  an  attempt  was  made  to  have  what 
had  been  the  property  of  the  partnership  applied  in 
liquidation  of  those  debts.  But  it  was  held  that  such 
property  was  no  *  longer  the  joint  property  of  the  two  [  *  337] 
partners,  but  had  been  converted  into  the  separate 
property  of  James. 

Ex  parte  Williams  (b)  was  a  similar  case,  only  that  Ex  parte 
on  the  dissolution  no  assignment  was  made.  There  Williams, 
was  not  even  any  written  agreement  showing  the  terms 
on  which  the  dissolution  took  place.  But  it  was  sworn 
that  the  partner  who  continued  the  business  was  to 
take  all  the  stock  and  effects  of  the  old  firm  ;  and  it 
was  held  that  they  had  become  his  separate  property, 
and  could  not  be  considered  as  the  joint  property  of 
the  dissolved  partnership. 

These  decisions  have  always  been  regarded  as  settling 
the  law  upon  the  subject  of  conversion  of  partnership 
property,  and  have  been  constantly  followed.  They 
were  not,  it  will  be  observed,  decided  with  reference  to 
the  doctrine  of  reputed  ownership,  but  with  reference 
only  to  the  real  agreement  come  to  between  the  part- 
ners. They  apply  as  much  to  cases  of  a  change  of 
interest  on  death  as  on  retirement  (c). 

The  case  of  Ex  parte   Owen   (d),  which  has   been  Ex  parte 
already  referred  to  (e),  shows  that  similar  principles  <Jwen- 
must  be  applied  in   order  to  determine  what,  on  the 
formation  of  a  partnership,  has  been  converted  from 
separate  into  joint  estate  (f). 

In  order,  however,  that  an  agreement  may  have  the  Agreement 
effect  of  converting  joint  into  separate   estate,  or  vice  must  be 
versa,   the   agreement  must  be  executed,    and  not  be  executed- 
executory  merely,     In  Ex  parte  Wheeler  (g),  a  retiring  Ex  parte 
Wheeler. 

(b)  11  Ves.  3.     Compare  Ex  parte  Cooper,  1  M.  D   &  D.  358. 

(c)  See  Be  Simpson,  9  Ch.  572  ;  and  compare  Ex  parte  Morley, 
8  Ch.  10-26,  and  Ex  parte  The  Manchester  Bank,  12  Ch.  D.  917, 
and  13  ib.  46.").  These  three  cases  turned  on  the  construction  of 
the  partnership  articles,  combined  in  the  last  two  with  the  wills 
of  the  deceased  partners.  The  wills  and  the  articles  together 
prevented  a  conversion. 

(d)  4  De.  G.  &Sm   351. 
le)  Ante,  p.  329. 

(/)  See,  too,  Ex  parte  Barrow,  2  Rose,  252:  and  Belcher  v. 
Sikes,  8  B.  &  C.  1*5.  for  a  case  where  separate  estate  was  made 
joint  by  a  deed  of  dissolution  not  clearly  expressed. 

{g)  Buck.  25.  See,  too.  Ex  parte  Wood,  10  Ch.  I).  554;  Ex 
parte  Cooper,  1  M.  D.  &  D.  358  ;  and  the  case  of  the  Bank  of 
England,  3  De  G.  F.  &  J.  645,  noticed   ante,   p.  :530  ;  and  com- 


412  PARTNERSHIP  PROPERTY. 

Ek.  III.  partner  and  a  continuing  partner  entered  into  an  agree- 

onap.  4.  sect.  menfc  in  writing,  by  which  the  retiring  *partner  assigned 

J the    stock,   goodwill,   lease,   furniture,   fixtures,   books, 

[  *  338]  and  debts  of  the  firm,  to  the  continuing  partner,  and 
the  latter  agreed  to  pay  certain  debts  of  the  partner- 
ship for  which  his  father,  he  said,  would  be  security. 
The  father,  however,  refused  to  give  any  security,  and 
this  further  act  was  necessary  to  be  done  in  order  to 
complete  the  transfer  of  the  property.  The  continuing 
partner  having  become  bankrupt,  the  court  held  that 
the  property  of  the  old  firm  had  not  been  converted 
into  the  separate  estate  of  the  continuing  partner,  the 
agreement  being  still  executory  when  the  bankruptcy 
occurred. 
Effect  of  Moreover,  an   agreement  which   can  be  successfully 

fraud.  impeached  for  fraud,  will  not   affect  the   property  to 

which  it  may  relate  (h);1  and  it  must  not  be  forgotten, 
that  in  the  event  of  bankruptcy,  the  trustee,  as  repre- 
senting the  creditors,  may  be  able  to  impeach  as 
fraudulent  against  them,  agreements  by  which  the 
bankrupt  himself  would  have  been  bound  (*).  In  a 
case  where  both  the  partnership  and  the  individual 
partners  were  insolvent,  an  agreement  by  one  of  them 
transferring  his  interest  to  the  others,'  and  thereby 
converting  what  was  joint  estate  into  the  separate  estate 
of  the  transferee,  was  held  invalid  ;  for,  although  no 
fraud  may  have  been  intended,  the  necessary  effect  of 
the  arrangement  was  to  delay  and  defeat  the  joint 
creditors  (k).  The  firm  became  bankrupt  shortly  after 
the  assignment  was  made. 

pare  Ex  parte  Gibson,  2  Mont.  &  Ayr.  4  :  Ex  parte  Sprague,  4  De 
G.  M.  &  G.  866  ;  Hawkins  v.  Hawkins.  4  Jur.  N.  S.  1044. 

(/<)  Ex  parte  Rowlandson,  1  Rose,  416. 

(i)  See  Be  Kemptner,  8  Eq.  286  ;  Anderson  v.  Maltby,  2  Ves. 
J.  244  ;  Billiter  v.  Young,  6  E.  &  B.  40. 

(k)  Ex  parte  Mayou,  4  D.  G.  J.  &  S.  664  ;  Ex  parte  Walker.  4 
De  G.  F.  &  J.  509."  See.  also,  Luff  v.  Horner,  3  Fos.  &  Fin.  480, 
which  seems  to  have  been  a  clear  case  of  fraud  upon  a  creditor. 


1  Second  Nat.  Bank  v.  Farr  (N.  J.),  7  Atl.  Rep.  892(1886); 
Bank  v.  Smith,  26  W.  Va.  541  (1886);  Phelps  v.  McNeely,  66 
Mo.  554  (1877). 


GENERAL  NATURE  OF  SHARES.  413 


*  CHAPTER  V.  [*339] 

OF  SHARES  IN  PARTNERSHIPS. 

In  the  present  chapter  it  is  proposed  to  examine  the  Bk.  III. 
following  subjects  : —  Chap.  5. 

§  1.   The  nature  of  a  share  in  a  partnership,  and  the  Subject  of 
rules  which  govern  its  devolution  in  case  of  death.  present 

§  2.  The  amount  of  each  partner's  share.  chapter. 

§  3.   The  lien  which  each  partner  has  on  the  joint 
property,  and  on  the  shares  of  his  co-partners. 

§  4.  The  mode  in  which  a  share  is  taken  in  execution 
for  the  separate  debts  of  its  owner. 

§  5.  The  transfer  of  shares. 


Section  I. — Of  the  Nature  of  a  Shake,  and  the  .Rules 
Which  Govern  its  Devolution  in  Case  of  Death. 

In  the  absence  of  a  special  agreement  to  that  effect,  Nature  of  a 
all  the  members  of  an  ordinary  partnership  are  inter-  share  in  a 
ested  in  the  whole  of  the  partnership  property  ;  but  it  nrm- 
is  not  quite  clear  whether  they  are  interested  therein  as 
tenants  in  common,  or  as  joint  tenants  without  benefit 
of  survivorship,  if  indeed  there  is  any  difference  between 
the  two.      It  follows  from  this  community  of  interest, 
that  no  partner  has  a  right  to  take  any  portion  of  the 
partnership  property,  and  to  say  that  it  is  his  exclu- 
sively (a).     No  partner    has   any   such   right,   either 
during  the  existence  of  the  partnership  or  after  it  has 
been  dissolved.1 

What  is  meant  by  the  share  of  a  partner  is  his  pro-  ghare  a 
portion  of  the  partnership  assets  after  they  have  been  right  to 

(a)  Lingen  v.  Simpson,  1  Sim.  &  Stu.  600  ;  CockTe  v.  Whitiug,  money- 
Taml.  55  ;  and  see  the  cases  cited  in  the  next  note. 

1  A  partner  has  no  special  interest  in  any  particular  piece  of 
property  belonging  to  his  firm.  His  interest  is  to  receive  his 
proper  proportion  of  the  whole  amount  of  assets  remaining  after 
the  payment  of  all  the  firm's  debts.  Trowbridge  v.  Cross,  117 
111.  109  (1886);  Tobey  v.  McFarlin,  115  Mass.  98  (1874);  Filley 
r.  Phelps,  18  Conn.  294  (1847);  Staats  v.  Bristow,  73  N.  Y.  264 
(1878). 


414  SHARES. 

Bk'  IJI"  „,        a^  realised  and  converted  into  money,  and  all  the  debts 
Chap.  o.  beet.  an(j  liabilities  have  been  paid  and  discharged  (b).     This 

J it  is,  and  this  only,  which  *  on  the  death  of  a  partner 

[  *  340]  passes  to  his  representatives,  or  to  a  legatee  of  his 
share  (c);  which  under  the  old  law  was  considered  as 
bonanotabilia  (d);  which  on  his  bankruptcy  passes  to 
his  trustee  (e);  and  which  the  sheriff  can  dispose  of 
under  a  ft.  fa.  issued  at  the  suit  of  a  separate  cred- 
itor ( /  ),  or  under  an  extent  at  the  suit  of  the  Crown  (g). 
it  is  however  to  be  observed  that  the  Crown  never  holds 
jointly  or  in  common  with  its  subjects  (h).  Conse- 
quently, if  a  partner  is  outlawed,  whereby  his  interest 
in  the  partnership  is  forfeited,  the  other  partners  lose 
their  interests  also;  the  Crown  jrst  taking  the  share  of 
the  delinquent  partner,  and  then  by  its  prerogative  ex- 
cluding the  other  partners  with  whom  it  would  other- 
wise be  a  tenant  in  common.  It  need  hardly  be  said 
that  this  prerogative  is  not  enforced  in  modern  times  (i).1 

Of  the  doctrine  of  non- survivorship  between  -partners. 

Jus  accres-  -^  *s  an  °^  anc*  well-established  maxim,  that  Jus  ac- 

cendi,  &c.       crescendi  inter  mercatores  locum  non  habet  (k).     This 

(b)  See  Doddington  r.  Hallet,  1  Ves.  S.  498-9  ;  Croft  v.  Pike,  3 
P.  W.  ISO  ;  West  v.  Skip,  1  Ves.  S.  242  ;  Taylor  v.  Fields,  4  Ves. 
396  ;  Crawshay  v.  Collins,  15  Ves.  229  ;  Featherstonhaugh  v.  Fen- 
wick,  17  Ves.  298  ;  Darby  v.  Darby,  3  Drew.  503. 

(c)  Farquhar  v.  Hadden,  7  Ch.  1.     See  infra,  bookiv.  ch.  3,  §3. 

(d)  Ekins  v.  Brown.  1  Spinks,  Ecc.  &  Adm.  Rep.  400  ;  A.-G.  v. 
Higgins,  2  H.  &  N.  339.  See,  as  to  the  locality  of  a  share,  Be 
Ewing,  L.  R.  6  P.  D.  19. 

(e)  See  the  last  note  but  two,  and  Smith  v.  Stokes.  1  East,  363. 
(/)  Skip  v.  Harwood,  2  Swanst.  586  ;  Re  Wait.  1   Jac.   &    W. 

605  ;  Johnson  v.  Evans,  7  Man.  &  Gr.  240. 

(g)  R.  v.  Sanderson.  Wight  w.  50;  R.  r.  Rock.  2  Price,  198  ;  R. 
v.  Hodge,  12  ib.  537  ;  Spears  v.  The  Lord  Advocate.  6  CI.  &  Fin. 
180. 

(/;)  2  El.  Com.  409  ;  Hales  v.  Petit,  Plow.  257. 

(i)  See  Collyer  on  Partn.  72.  Forfeiture  for  felony  and  treason 
was  abolished  by  33  &  34  Vict.  c.  23,  %  1.     See  ante,  p.  74. 

(fc)  Co.  Lit.  182  a. 

1  If  a  partner  mortgage  or  sell  his  interest  in  the  firm  property, 
his  mortgagee  or  assignee  takes  no  greater  right  than  he  had  him- 
self and  is  entitled  only  to  the  surplus  of  assets  over  the  firm 
debts.  Matlack  v.  James,  13  N.  J.  Eq.  126  (1861):  Beecher  v. 
Stevens,  43  Conn.  587  (1876);  Bank  v.  Sawyer,  38  Oh.  St.  339 
(1882):  Hiscock  v.  Phelps.  I!)  X.  Y.  97  (1872V  The  surpluseov- 
ered  by  a  mortgage  of  a  partner's  interest  is  that  remaining  at  the 
time  of  the  foreclosure  proceedings  and  not  that  of  the  date  of  the 
mortgage.  That  is,  such  a  mortgage  is  subject  to  the  subse- 
quently arising  equities  and  indebtedness  of  the  firm  as  well  as 
those  existing  at  the  time  of  its  execution.  Churchill  i>.  Proctor. 
31  Minn.  1:29  (1883)  ;  Burbank  v.  Wiley,  79  N.  Ca.  501  (1878)  ; 
Bank  v.  Godwin,  5  N.  J.  Eq.  334  (1846).' 


NON-SURVIVORSHIP  BETWEEN  PARTNERS.  415 

is  a  common  law,  and  not  only  an  equitable  maxim;  but  Bk.  III. 
whilst  its  application  in  equity   was   subject   to  few,  if  ^"al'-  •-'•  Sect. 

any,  exceptions  (I),  it  was  not  at  law  so  universally  ap-  _! 

plicable  as  the  generality  of  its  terms  might  lead  one  to 
suppose. 

*As  regards  real  property  and  chattels  real,  the  legal  [  *  841] 
estate  in  them  is  governed  by  the  ordinary  doctrines  of  Devolution 
real  property  law  ;  and,  therefore,   if  several  partners  ot  ^gal 
are  jointly  seised  or  possessed  of  land  for  an  estate  in  lamj 
fee,  or  for  years,  on  the  death  of  any  one;  the  legal  es- 
tate therein  will  devolve  on  the  surviving  partners  (m) ;  Rule  as  to 
and  they  can  mortgage  it  for  partnership  debts  (n)  and  tne  equitable 
sell  it  for  the  purpose  of  winding  up  the  affairs  of    the 
partnership  (o).      But  the  surviving  partners  are,  as 
regards  the  interest   of  the  deceased   j^artner,  deemed 
to  be  trustees  thereof  for  the  persons  entitled  to  his  es- 
tate, and  are  compellable  to  account  with  them   accord- 
ingly (p).      This,  however,  is  only  the  case   on   the   as- 
sumption that  the  property  in  question   is   partnership 
property,  and  forms  part  of  the  common  stock  in  which 
the  deceased  had  an  interest  as  a  partner  (q)} 

(!)  In  Nelson  v.  Bealby,  4  De  G.  F.  &  J.  321,  affirming  S.  C, 
30  Beav.  472,  articles  of  partnership  provided  that  on  the  death 
of  A.  his  executors  should  receive  one-half  of  the  assets  from  B.  ; 
hut  they  were  silent  as  to  what  was  to  be  done  on  the  death  of  B. 
It  was,  however,  held  that  his  executors  were  entitled  to  half  the 
assets  from  A. 

(m)  Jefferys  v.  Small,  1  Vern.  217  ;  Elliott  v.  Brown,  3 
Swanst,  489.1  n. 

(n)  Re  Clough,  31  Ch.  D.  324,  and  anie,  p.  218. 

(o)  Shanks  v.  Klein,  15  Otto,  18  (Amer.).  See,  also,  West  of 
England,  &c,  Bank  v.  Murch,  23  Ch.  D.  138. 

( p)  Jefferys  v  Small,  1  Vern.  217  ;  Lake  v.  Craddock.  3  P.  W. 
158  ;  Lake  v.  Gibson,  1  Eq.  Ca.  Ah.  290  ;  Elliott  v.  Brown,  3 
Swanst.  489,  n.  ;  Lyster  v.  Dolland,  1  Ves.  J.  435  ;  Jackson  v. 
Jackson,  9  Ves.  596,  597.  See,  also,  Re  Ryan.  L.  R.  Ir.  3  Eq. 
222,  where  title  of  persons  claiming  under  a  deceased  partner 
prevailed  against  a  mortgagee  of  the  surviving  partner  ;  the 
mortgage  being  for  hid  separate  debt,  and  the  mortgagee  having 
notice  of  the  equitable  interest.  As  to  part  of  the  property  there 
was  no  such  notice,  and  as  to  that  the  mortgagee's  title  pre- 
vailed. 

(q)  Morris  v.  Barrett,  3  Y.  &  J.  384  ;  Reilley  v.  Walsh,  11  Ir. 
Eq.  22.  A  case  of  a  lease  acquired  for  the  purpose  of  a  partner- 
ship which  was  never  formed.     See  ante,  p.  331. 

1  Joint  tenancy  has  generally  in  America  been  deprived  by 
statute  of  the  incident  of  survivorship.  Therefore,  the  legal 
title  to  the  interest  of  a  partner  in  the  lands  held  by  himself 
and  his  associates  for  the  purposes  of  a  partnership,  descends  upon 
his  death  to  his  heirs  at  law  subject  to  the  claims  of  his  partners 
and  the  creditors  of  the  firm.  King  r.  Weeks,  70  N.  Ca.  372 
(1874)  ;  Whitman  r.  R.  R.  Co.,  3  Allen  133  (1861)  ;  Bufi'um  v. 
Buffum,  49   Me.  108    (1801);  Abernathy   v.  Moses,    73   Ala.  381 


410 


SHARES. 


Bk.  III. 
Chap.  5.  Sect. 
1. 

Devolution 

[*342] 

of  choses  in 
action. 


As  regards  choses  in  action,  the  right  to  sue  for  a 
debt  owing  to  the  firm,  as  well  as  the  liability  to  bo 
sued  for  a  debt  owing  by  it,  also,  at  law,  devolved,  in 
the  event  of  the  death  of  one  partner,  upon  the  surviv- 
ing partners  exclusively  (r).  In  equity,  *  however,  the 
leo-al  personal  representatives  of  a  deceased  partner 
were  entitled  to  have  a  debt  due  to  the  partnership 
brought  into  account  by  the  surviving  partners  (s),  and 
were  liable  to  be  proceeded  against  by  a  creditor  of  the 
firm  (t).  The  Judicature  Acts  have  not  materially 
altered  the  law  in  this  respect  (u).1 

(r)  Kemp  v.  Andrews,  Carth.  170  ;  Dixon  v.  Hammond,  2  B. 
&  A.  310  ;  Martin  v.  Crompe,  1  Lord  Raymond,  340,  and  2  Salk. 
344  ;  and  see  Slipper  v.  Stidstone,  5  T.  R.  493  ;  French  r.  And- 
rade,  6  T.  R.  582.  There  is  indeed  an  old  casein  which  an  ac- 
tion of  assumpsit  for  a  partnership  deht  was  held  to  be  properly 
brought  by  the  executors  of  a  deceased  partner,  and  the  surviv- 
ing partners  jointly  ;  Hall  v.  Huffam,  alias  Hall  v.  Rougham,  2 
Lev.  188  and  228,  and  3  Keble,  798 ;  but  this  case  is  in  direct 
opposition  to  the  last  cited,  and  is  contrary  to  what  was  clearly 
settled  before  the  Judicature  Acts. 

(s)  The  receipt  of  the  suvivors  for  a  debt  due  to  the  firm  is  a 
good  discharge  to  the  debtor,  Brasier  v.  Hudson,  9  Sim.  1  ;  Phil- 
ips v.  Philips,  3  Ha.  281  ;  and  the  surviving  partner  can,  with- 
out making  the  executors  of  the  deceased  parties,  sustain  an 
action  for  an  account  against  a  debtor  to  the  firm.  Haig  v.  Gray, 
3  De  G.  &  Sm.  741. 

(i)  Ante,  book  ii.  ch.  2,  ?.  1. 

(«)  See  ante,  book  ii.  ch.  2  and  3. 

(1882)  ;  Cobble  v.  Tomlinson,  50  Ind.  550  (1875)  ;  Buchan  v. 
Sumner,  2  Barb.  Ch.  165<1847).  Real  estate  acquired  for  part- 
nership use  is  indeed  regarded  as  converted  to  personalty  ;  but 
the  conversion  in  America  is  only  for.  the  purposes  of  the  part- 
nership and  not  so  far  as  concerns  the  devolution  of  the  land 
upon  the  death  of  one  of  the  partners.  The  share  of  a  deceased 
partner  in  the  surplus  of  real  estate  remaining  after  the  dis- 
charge of  all  the  demands  against  the  firm,  and  the  complete 
adjustment  of  its  affairs  goes  to  his  heirs  subject  to  his  widow's 
dower  and  not  to  his  executor  or  administrator.  Foster's  Ap- 
peal, 74  Pa.  St.  391  (1873);  Leaf's  Appeal,  105  Pa.  St.  505 
(1884)  ;  Shearer  r.  Shearer,  98  Mass.  107  (1867)  ;  Strong  v.  Lord, 
107  111.  25  (1883)  ;  (.rissoni  v.  Moore,  lOGInd.  290  (1885)  ;  Good- 
burn  r.  Stevens,  5  Gil.  1  (1847)  ;  Fairchild  v.  Fairchild.  64  X.  Y. 
471  (1876);  Campbell  v.  Campbell,  30  N.  J.  Eq.  415  (1878)  ; 
Buffum  v.  Buffum,  49  Me.  108  (1861).  Of  course,  since  the  right 
to  settle  the  firm's  business  belongs  to  the  surviving  partner,  he 
is  entitled  to  the  control  of  the  real  estate  of  the  firm  in  order 
to  effect  a  settlement.  Merritt  v.  Dickey,  38  Mich.  41  (1878)  ; 
Shanks  v.  Klein,  104  U.  S.  18  (1881)  ;  Easton  v.  Courtw right.  84 
Mo.  27  (1884)  :  Keith  v.  Keith,  143  Mass.  262  (1887). 

1  On  the  death  of  a  partner  the  title  to  the  firm's  choses  in 
action  vests  in  the  surviving  partner  and  he  must  bring  the  action 
for  their  recovery  in  his  own  name  without  joining  as  co-plain- 
tiffs with  himself  the  personal  representatives  of  the  decedent. 
Davis  v.  Church,  1  W.  &  S.  240  (1841)  ;  Wallace  v.  Fitzsimmons, 


NON-SURVIVORSHIP  BETWEEN  PARTNERS.  417 

As  regards  ordinary  chattels,  it  was  held  in  Buckley  Bk.  III. 
v.  Barber  (v),  that  the  interest  of  a  deceased  partner  Chap.  o. Sect 

in  chattels  belonging  to  the  firm  did  not  devolve  upon  1 ___ 

the  surviving  partners,  so  as  to  enable   them  to  give  a  Devolution 
good  legal  title  to  the  chattels  as  against  the  executors  ot  ordinary 
of  the  deceased  ;  and  that  consequently  such  chattels     a   e 
might  be  seized  under  a  fi.  fa.   issued  on   a   judgment  b^J^  ' 
obtained  against  the  executors  by  a  separate  creditor 
of  the  deceased  partner  (x).1 

The  extent  to  which  goodwill  survives  will  be  noticed  Goodwill, 
hereafter  (y). 

Before  quitting  the  present  subject,  it  may  be  ob- 
served that  the  doctrine  of  non-suvivorship  amongst 
partners  is  not  confined  to  merchants  nor  even  to 
traders,  but  extends  to  partners  generally  (z).  But  it 
does  not  apply  to  societies  not  having  gain  for  their 
object,  and  the  members  of  which  are  merely  joint 
tenants  of  the  property  they  hold  (a). 

(v)  Buckley  v.  Barber,  6  Ex.  164  ;  and  see  per  Dampier,  J., 
in  R.  v.  The  Collectors  of  Customs,  2  M.  &  S.  223. 

(,i-)  This  case  was  certainly  perplexing.  It  made  a  useless 
distinction  between  land,  debts  and  ordinary  chattels  ;  it  logic- 
ally involved  the  consequence  that  a  surviving  partner  could 
only  properly  sell  his  share  of  a  partnership  cuattel  ;  and  it 
was  inconsistent  with  the  principles  which  induced  courts  of 
equity  to  decline  (except  under  special  circumstances)  to  grant 
a  receiver  at  the  intance  of  the  executors  of  a  deceased  against 
a  surviving  partner.  In  Taylor  v.  Taylor,  7  Mar.  1873,  Lord 
Justice  James,  sitting  for  V.-C.  Wickens,  expressed  bis  disap- 
proval of  Buckley  v.  Barber.  All  this  is,  however,  of  little 
consequence  now. 

(y)  See  book  iii.  ch.  9,  \  2. 

(z)  See  Buckley  v.  Barber.  6  Ex.  164  ;  Aunand  v.  Honiwood, 
2  Ch.  Ca.  129  ;  Jefferys  v.  Small,  1  Vern.  217  ;  Lake  v.  Gibson, 
1  Eq.  Ca.  Ab.  290  ;  Lake  v.  Craddock.  3  P.  W.  158. 

(a)  As  an  instance,  see  Brown  v.  Dale,  9  Ch.  D.  78. 

1  Dall.  248  (1788)  ;  Manning  v.  Brickell,  2  Havw.  (N.  Ca.)  133 
(1800)  ;  Stevens  r.  Rollins,  34  Me.  226  (1852)  ;  Davidson  v. 
Weems,  58  Ala.  187  (1877);  Bassett  v.  Miller,  39  Mich.  133 
(1878)  ;  Ambs  v.  Caspari,  13  Mo.  App.  586  (1882)  ;  Daby  v. 
Ericsson,  49  N.  Y.  786  (1872). 

1  The  same  doctrine  is  enunciated  i:i  Tremper  v.  Conklin,  44 
N.  Y.  58,  61-2  by  Earl,  Com.  A  number  of  authorities  declare 
that  of  the  firms  chattels  in  possession  of  the  surviving  partner 
and  the  executors  of  the  deceased  partner  are  tenants  in  com- 
mon. Wilson  v.  Soper,  13  B.  Mon.  411  (1853)  ;  Adams  ?;.  Ward, 
26  Ark.  135  (1870)  ;  Skipwifh  v.  Lea,  16  La.  Ann.  247  (1861). 
But  the  doctrine  is  repudiated  by  the  weight  ot  authority  ;  see 
Oram?;.  Rothermel,  98  Pa.  St.  300  (1881)  :'  Betta  v.  June,  51  N. 
Y.  274  (1873)  ;  Adams  v.  Hackett,  27  N.  II.  289  (1883)  :  Filley 
v.  Phelps,  18  Conn.  291  (1847)  ;  Bassett  v.  Miller.  39  Mich.  133 
(1878)  ;  Robertshaw  v.  Hanwav,  52  Miss.  713  (1876)  :  Smith  r. 
Wood,  31  Md.  293  fl869)  ;  Mendenhall  v.  Benbow,  84  N.  Ca.  646 
(1881)  ;  Bohler  v.  Tappan,  1  Fed.  Rep.  469  (1880). 

*  4   LAW   OF   PARTNERSHIP. 


418 


SHARES. 


[  *  343] 


*  Of  the  doctrine  that  shares  are  personal  estate. 


Shave 

personal 

estate. 


Bk.  III.  From  the  principle  that  a  share  of  a  partner  is  noth- 

Chap.  5.  Sect,  ing  more  than  his  proportion  of  the  partnership  assets 

!■         after  they  have  been  turned  into  money  and  applied  in 

liquidation  cf  the  partnership  debts,  it  necessarily  fol- 
lows that,  in  equity,  a  share  in  a  partnership,  whether 
its  property  consists  of  land  or  not,  must,  as  between 
the  real  and  personal  representatives  of  a  deceased 
partner,  be  deemed  to  be  personal  and  not  real  estate, 
unless  indeed  such  conversion  is  inconsistent  with  the 
agreement  between  the  parties  (b).1  And  although  the 
decisions  upon  this  point  are  conflicting,  the  authorities 
which  are  in  favour  of  the  above  conclusion  certainly 
preponderate  over  the  others. 

In  Thornton  v.  Dixon  (c),  the  Court  recognised  the 
rule  that  partnership  property  must  be  considered  as 
personal  estate;  but  held  that  the  lands  which  were 
there  in  question,  could  not  be  so  considered,  as  they  had 
been  conveyed  to  all  the  partners  in  common,  and  there 
was  no  agreement  for  a  sale. 

In  Bell  v.  Phyn  (d),  partners  in  trade  purchased 
with  the  funds  of  the  firm  a  share  in  a  plantation,  and 
kept  the  accounts  relating  to  the  estate  in  the  partner- 
ship books;  and  it  was  held  upon  the  authority  of  the 
last  case,  that  assuming  the  land  to  have  become  part- 


Thornton  v. 
Dixon. 


Bell  r.  Phyn. 


(6)  See,  as  to  this,   Steward  v.  Blakeway,   4  Ch.   603,  and  6 
Eq.  479. 

(c)  3  Bro.  C.  C.  199. 

(d)  7  Ves.  453. 


1  In  the  absence  of  express  agreement  to  the  contrary,  the 
courts  in  America  regard  land  acquired  for  partnership  purposes 
as  converted  into  personal  property  only  for  the  purposes  of  the 
partnership  and  the  interest  of  a  partner  in  such  lands  as  may 
remain  after  settlement  of  the  firm's  business  devolves  upon  his 
heirs;  see  note  1,  p.  341.  By  agreement,  however,  the  partners 
may  convert  the  firm  real  estate  into  personalty  for  all  purposes, 
and  in  such  a  case  the  interest  of  the  deceased  in  the  surplus  re- 
maining after  the  winding  up  of  the  business  goes  to  his  per- 
sonal representatives.  Davis  r.  Christian.  15  Gratt,  11  (1859); 
and  cases  cited  below.  It  has  been  held  that  such  an  agreement 
has  been  made  where  the  partnership  articles  authorize  the  sur- 
viving partner  to  take  the  entire  assets.  Leaf's  App.  105  Pa.  St. 
505  (1884);  Haddock  v.  Astbury.  32  N.  J.  Eq.  181  (1880);  or 
where  the  firm  has  for  its  object  the  dealing  in  land  as  a  com- 
modity.    Ludlow  v.  Cooper,  4  Oh.  St.  1  ( ).     This  is  denied. 

Rowner.  in  Strong?'.  Lord,  107  111.  25  (1883).  And  it  lias  even 
been  said  that  an  agreement  requiring  the  land  to  be  held  solely 
for  the  purposes  of  the  partnership  amounts  to  a  conversion  out 
and  out.  Kammelsberg  v.  Mitchell,  29  Oh.  St.  22  (1875) ;  Columb. 
v.  Reed,  24  N.  Y.  505  (1862). 


SHARES  ARE  PERSONAL  ESTATE.  419 

nership  property,  it  ought  not  to  be  regarded   as  per-  Bfe.  III. 
sonal  estate.  Chap.  5.  Beet. 

In  Randall  v.  Randall  (e),  the  partners  were  farmers,  J 

maltsters,  and  biscuit  makers.     They  bought  land  for  Randall  v. 
the  farming  business,  and  it  was  held  that  as  it  was  not  Randa11- 
acquired  for  the  purpose  of  any  partnership  in   trade, 
the  land  could  not  be  treated  as  personalty. 

In  Cookson  v.  Cookson  (/)  a  father  who  was  seised  c°okson  v. 
in  fee  of  land  on  which  he  carried  on  business  as  a  bot-  Cookson- 
tie- manufacturer,   took    his    son    into  partnership,  and 
conveyed  a  share  in  the  iand  to  him.     The  land  was  de- 
clared b)  the  articles  of  partnership  to  be  partnership 
property.     But  on  the  death  of  the  ^father,  it  was  held  [  *  344] 
that  his  share  in  the  Iand  was  to  be  treated  as  real  es- 
tate, no   sale  being  required  for  the  payment  of  the 
partnership  debts  for  any  other  purpose. 

These  are  the  cases  which  militate  against  the  rule 
under  discussion.  The  following  are  those  which  sup- 
port it  : — 

In  Ripley  v.  Waterivorth  (g),  partnership  land  was  Ripley  v. 
conveyed  to  trustees  upon  trust,  upon  a  dissolution  of  Waterworth. 
the  partnership  to  sell  and  pay  the  partnership  debts, 
and  divide  the  residue  of  the  money  arising  from  the 
sale  amongst  the  partners;  and  it  was  held,  upon  the 
death  of  one  of  them,  that  his  share  in  the  land  was 
personal  estate,  although  the  land  was  not  in  fact  sold, 
and  the  deceased's  share  in  it  was  purchased  by  the 
surviving  partners  under  a  clause  enabling  them  so 
to  do,  and  contained  in  the  conveyance  to  the  trustees. 

In  Toivnshend  v.  Devaynes  (h),  two  persons  in  part-  rpowngll  nd 
nership  as  paper-makers,  purchased  paper  mills  for  the  v.  Devavnes. 
use  of  the  firm,  and  paid  for  them  out  of  its  funds.  It 
was  agreed  that  on  the  death  of  either,  the  survivor 
should  have  the  option  of  purchasing  his  share.  One 
of  the  partners  died,  and  his  share  was  purchased  by 
the  survivor.  It  was  held  that  the  whole  of  the  pur- 
chase-money formed  part  of  the  personal  estate  of  the 
deceased,  although  most  of  the  money  was  paid  in  re- 
spect of  the  interest  of  the  deceased  in  the  mills. 

In  Phillips  v.  Phillips  (i),  two  persons  in  partnership  Phillips  ». 
as  brewers  purchased  public-houses  for  the  purposes  of  Phillips. 

(p)   7  Sim  271. 

(/)  8  Siin.  529. 

(g)  7  Ves.  425. 

(//)  1  Mont.  Part,  note  2  A.  Appx.  p.  96;  see,  too,  11  Sim. 
498,  ii. 

(/)  1  M.  &  K.  649.  See  ante,  p.  332,  note  (ft),  as  to  the  estates 
which  were  devised,  and  which  were  held  not  converted  into 
personalty. 


420 


SHAKES. 


Bk.  III. 
Chap.  5.  Sect. 
1. 

Broom  v. 
Broom. 
Morris  v. 

Kearsley. 

[  *  345] 


Houghton  t. 
Houghton. 


Darby  v. 
Darby. 


Essex  v. 
Essex. 


their  trade,  and  had  them  conveyed  to  both  in  fee.  On 
the  death  of  one  of  them,  it  was  held  that  his  share  in 
the  houses  was  to  be  treated  as  personal  estates. 

Broom  v.  Broom  (k)  is  a  decision  to  the  same  effect 
as  the  last,  and  decided  on  its  authority. 

In  Morris  v.  Kearsley  (Z),  a  partnership  of  brewers 
was  possessed  of  real  estate  conveyed  partly  to  the 
partners  as  tenants  in  common,  and  partly  to  one  or 
more  of  the  partners  in  trust  *  for  the  firm ;  and  it  was 
decided  that  the  several  lands,  hereditaments,  and 
premises  belonging  to  the  partnership,  ought  to  be  con- 
sidered as  personal  estate. 

In  Houghton  v.  Houghton  (in),  two  brothers,  A.  &  B., 
were  partners  as  soap-boilers.  They  purchased  land 
for  the  purposes  of  their  trade,  took  a  conveyance  to 
themselves  as  tenants  in  common,  and  mortgaged  the 
land  for  the  purchase  money.  They  then  built  on  the 
land,  insured  the  buildings,  and  paid  the  expenses  and 
the  interest  on  the  mortgage  debt  out  of  the  partner- 
ship funds.  A.  died  intestate,  and  B.  took  another 
brother,  C,  into  partnership.  B.  and  C.  paid  off  the 
mortgage,  and  took  a  reconveyance  to  themselves  as 
joint  tenants  in  fee,  and  expended  money  in  building 
and  insurance,  defraying  the  expense,  as  well  as  pro- 
viding the  mortgage  money,  out  of  the  funds  of  the 
partnership.  On  B.'s  death  it  was  held  that  the  land 
and  buildings  had  clearly  become  partnership  property, 
and  that  it  ought,  therefore,  to  be  treated  as  personal 
estate. 

In  Darby  v.  Darby  (n),  two  brothers  embarked  in 
joint  speculations  in  land.  Their  scheme  was  to  buy 
land,  convert  it  into  building  sites',  and  then  sell  it  at  a 
profit.  This  was  done  on  several  occasions,  the  land 
being  generally  conveyed  to  one  of  them  only.  On  tho 
death  of  that  one  it  was  held  that  his  interest  in  all  tho 
land  bought  by  both,  and  still  unsold,  was  personal 
and  not  real  estate. 

In  Essex  v.  Essex  (o),  two  brothers  were,  under  the 
will  of  their  father,  seized  of  freehold  lands.  They 
agreed  to  become  partners  as  curriers  and  tanners  for 
fourteen  years,  and  to  carry  on  their  business  on  those 
lands.     It  was  stipulated  that  if  either  died  during  the 


(k)  3  M.  &  K.  443. 

(I)  2  Y.  &  C.  Ex.  139.     The  report  does  not  state  how,  when, 
or  for  what  purpose,  the  property  was  originally  acquired. 
(»i)  11  Sim.  491. 
in)  3  Drew.  495. 
(o)  20  Beav.  442. 


SHARES  ARE  PERSONAL  ESTATE.  421 

co-partnership  term,  the  other  should  take  bis  share  in  Bk.  III. 
the  freenolds,  and  that   the   entirety  thereof,  including  Chap.  D-  Sect- 

the  plant  and  tan-pits,  should  be  valued  at  5,000  Z.     The  J 

fourteen  years  expired,  but  the  partnership  was  con- 
tinued as  before.  On  the  death  of  one  of  the  partners, 
it  was  held  that  his  share  in  the  freeholds  was  to  be 
regarded  as  personal  estate  ;  they  having  been  con- 
verted by  the  agreement  for  sale. 

*  In  Waterer  v.  Waterer  (p),  the  property  of  a  nur-  [  *  346] 
seryman,   devised  by   him,   with  the    goodwill   of    his  Waterer  v. 
business,  to  his  sons  as  tenants  in  common,  was  on  the  "  aterer, 
death  of  one  of  them  treated  as  personal   and  not  as 
real  estate. 

There  are  also  various  dicta  of  Lord  Eldon  in  favour  Result  of  the 
of  the  broad  principle  that   partnership  property  is  to  cases- 
be  regarded  as  personal  and  not  as  real  estate  (q). 

Upon  the  whole,  therefore,  it  is  submitted, 

1.  That  notwithstanding  Thornton  v.  Dixon,  Bell  v. 
Phyn,  and  Randall  v.  Randall,  the  true  rule  is,  as 
stated  by  the  Vice-Chancellor  Kindersley,  in  Darby  v. 
Darby  (r),  "that  whenever  a  partnership  purchases  real 
estate  for  the  partnership  purposes,  and  with  the 
partnership  funds,  it  is,  as  between  the  real  and 
personal  representatives  of  the  partners,  personal 
estate"  (s). 

2.  That,  notwithstanding  Cookson  v.  Cookson,  no 
satisfactory  distinction,  with  reference  to  the  question 
of  conversion,  can  be  drawn  between  land  purchased 
with  partnership  monies,  and  land  acquired  in  any 
other  way,  provided  such  land  is  in  the  proper  sense  of 
the  expression  an  asset  of  the  partnership  (t). 

3.  That  the  general  rule  may,  nevertheless,  be  ex- 
cluded by  an  agreement  express  or  implied  to  the  effect 
than  the  land  shall  not  be  sold.  The  reason  of  the  rule 
excludes  its  application  in  such  a  case  (it).1 

Upon  this  ground  it  was  held  in  a  recent  and  difficult  Stewart*. 


1  Slake  way. 


(p)  15  Eq.  4C2,  noticed  ante,  p.  333.  See,  also,  Murtagh  v. 
Costello,  7  L.  R.  Ir.  428. 

(7)  See  the  judgment  of  V.  C.  Kindersley,  in  Darby  v.  Darby, 
3  Drew.  499,  &c. 

(r)  3  Drew,  506. 

(s)  See,  in  addition  to  the  cases  referred  to  above,  Holroyd  v. 
Holroyd,  7  W.  K.  426 

U\  See  per  Lord  Eldon  in  Jackson  v.  Jackson,  9  Ves.  593.  "It 
is  very  difficult  to  make  a  distinction  between  a  joint  tenancy 
by  will,  by  a  gratuitous  deed,  or  a  purchase.  The  law  of 
merchants,  if  it  applies  to  one,  must  apply  to  all." 

(m)  Steward  v.  Blakeway,    1  Ch.  603.  and  (i  Eq.  479. 

1  See  note  1,  page  343;  also  note  1,  page  341. 


422 


SHARES. 


Bk.  III.  . 
Chap.  5.  Sect. 
1. 


[*347] 


The  rule 
only  applies 
to  partner- 
ship pro- 
perty. 


Doctrine  of 
conversion 
has  only  a 
restricted  ap 
plication. 


[  *  348] 


case,  that  a  farm  and  quarry  worked  by  co-owners  in 
partnership,  and  additional  lands  bought  by  them  out 
of  their  profits  for  the  purposes  of  their  business,  were 
not  to  be  treated  as  converted  into  money.  The  Court 
held  that  no  partner  could  *have  enforced  a  sale,  either 
of  the  original  farm  and  quarry  or  of  the  subsequent 
additions  to  it  (x). 

It  is  well  settled  that  the  doctrine  of  conversion  does 
not  apply  to  co-owners  as  distinguished  from  co-part- 
ners ;  nor  to  property  owned  by  persons,  who,  although 
they  may  be  partners  in  profits,  are  only  co-owners  of 
the  land  which  yields  them.  Thus,  where  two  out  of 
three  partners  were  owners  of  land  occupied  by  the 
firm,  and  for  which  the  firm  paid  a  rent,  and  the  land 
was  in  fact  kept  distinct  from  the  joint  property  of  the 
three  partners,  it  was  properly  held,  on  the  death  of 
one  of  the  two  partners  to  whom  the  rent  was  paid, 
that  his  interest  in  the  land  was  not  to  be  considered  as 
personal,  but  as  real  estate  (y).  So,  if  land  belongs 
to  all  the  partners  as  tenants  in  common,  but  not  as 
partners,  and  that  land  is  used  by  them  for  partnership 
purposes,  but  is  nevertheless  intended  to  remain  vested 
in  them  as  tenants  in  common,  and  not  to  form  part  of 
the  assets  of  the  firm,  the  share  of  each  partner  will  be 
real  and  not  personal  estate  (z).  In  the  case  now  sup- 
posed, co-owners  of  land  are.  partners,  but  the  co  own- 
ership continues  unaffected  by  the  partnership.  But 
it  is  not  possible  on  his  ground  to  uphold  Thornton  v. 
Dixon,  Bell  v.  Phyn,  Randall  v.  Randall,  or  Cookson  v. 
Cookson.  In  each  of  these  four  cases  the  land  had  be- 
come part  of  the  assets  of  the  firm,  or  it  had  not ;  if 
it  had,  these  four  cases  are  in  direct  conflict  with 
those  which  have  been  alluded  to  above  ;  whilst,  if  it 
had  not,  they  are  in  no  less  direct  conflict  with  other 
cases  which  are  authorities  on  the  question  what  is  and 
what  is  not  property  of  the  firm. 

The  doctrine  of  conversion  which  has  just  been  con- 
sidered, merely  amounts  to  this,  that  on  the  death  of  a 
partner  his  share  in  the  partnership  property  is  to  be 
treated  as  money  and  not  as  land.  It  follows,  however, 
from  this  doctrine  that  probate  duty  and  legacy  duty 
are  payable  in  respect  of  the  share  of  a  deceased  part- 
ner in  partnership  real  estate   (a);  and  a  *  partner's 


x)  [bid. 

(y)  Rowley  v.  Adams,  7  Beav.  548  ;  Balmain   v.  Shore,  i>    Ves. 
500.     See,  too,  Phillips?'.  Phillips,  antep.  3  52. 

(-.    Stewart  v.  Blakeway,  4  Ch.  603,  and  6  Eq.  479. 

(a)  See,  as  to  probate  duty,   A.-G.  v.    Hubbuck,  13  Q.   B.  D. 


AMOUNT  OF  EACH  PARTNERS  SHARES.  423 

share   in  such  estate  is  clearly  within  the  Charitable  Bk.  III. 
Uses  Act,  9  Geo.  2,  c.  36  (b).   *  Jhap.  5- Sect- 

"Whether  a  partner's  share  in  partnership  real  estate  J . 

can  give  him  a  qualification  for  voting  on  elections  of  Qualification 
members  of  Parliament  has  been  much  discussed  of  ior  vote- 
late.  It  is  settled  that  if  a  partner  has  no  interest  in 
partnership  realty  as  distinguished  from  the  money 
arising  from  its  sale,  his  interest  in  it  does  not  confer 
a  qualification  (c);  but  unless  this  is  the  case  the  equi- 
table doctrine  of  conversion,  which  has  no  practical 
operation  until  his  death,  does  not  deprive  him  of  the 
qualification  which  he  would  otherwise  have  as  a  joint 
tenant  or  tenant  in  common  (d). 

A  share  in  a  cost-book  mining  company  is  not  an  in- 
terest in  land  within  the  4th  section  of  the  Statute  of 
Frauds  (e);  nor  is  it  goods  or  chattels  within  the  17th 
section  (/). 


Section    II. — Of    the    Amount     of    Each    Partner's 
Share. 

The  proportions  in  which  the  members  of  a  firm  are 
entitled  to  the  property  of  the  firm,  or  in  other  words, 
the  amount  of  each  partner's  share  in  a  partnership, 
depends  upon  the  agreement  into  which  the  partners 
have  entered. 

In  the  event  of  a  dispute  between  the  partners  as  to  Shares  are 
the  amount  of  their  shares,  such  dispute,  if  it  does  not  prima  lacie 
turn  on  the  construction  of  written  documents,  must  be  equal. 

275,  and  10  ib.  488  ;  A.-G.  v.  Marquis  of  Ailesbury,  W.  N.  1887, 
p.  172,  reversing  S.  C.  16  Q.  B.  D.  408  ;  A.-G.  v.  Brunning,  8 
Ho.  Lo.  Ca.  243;  as  to  legacy  duty,  Forbes  v.  Steven,  10  Eq.178. 
distance  v.  Bradshaw,  4  Ha.  315,  is  to  the  contrary,  but  it  can- 
not now  be  relied  upon.  The  decision  of  the  Court  of  Appeals 
in  A.-G.  v.  Marquis  of  Ailesbury,  16  Q.  B.  D.  408,  was  reversed 
by  the  House  of  Lords,  12  App.  Ca.  672,  which  restored  the 
judgment  of  the  Divisional  Court  in  14  Q.  B.  D.  895.  Matson  r. 
Swift,  8  Beav.  368  must  be  taken  as  now  overruled:  see  Lord 
Macnaghten's  judgment,  12  App.  Ca.  696. 

(6)  Ash  worth  v.  Munn,  15  Ch.  D.  363. 

i>)  Watson  v.  Black,   16  Q.  B.  D.  270;  Bennett?'.  Blain.  15  C. 

B.  N.  S.  518:  Freeman  v.  Gainsford,  18  ib,  185.  Bee,  also, 
Spencer  v.  Harrison,  5  C.  P.  D.  97  ;  Wadmore  v.  Pear,  L.  K.  7  C. 
P.  212. 

('/)   Bax.er  v.  Brown,  7  Man.  &  Gr.  198;  Rogers  v.  Harvey,  5 

C.  B.  N.  S.  3. 

(e)  Watson  v.  Spratlev.  10  Ex.  222.     Compare  Vice  v.  Anson 
7B.&C.  409;  Boyce  v.  Green,  Batty,  608. 
{/)  Watson  v.  Spratley,  10  Ex.  222. 


424  SHARES. 

Bk.  III.  decided  like  any  other  pure  question  of  fact  (g);  and 

Chap.  5.  Sect.  j£  there  is   no  evidence  *  from  which   any  satisfactory 

~J conclusion  as  to  what  was  agreed  can  be  drawn  (h),  the 

[  *  349]  shares  of  all  the  partners  will  be  adjudged  equal  (i). 
Observations  This  rule  no  doubt  occasionally  leads  to  apparent  in- 
on  this  rule.  justice;  but  it  is  not  easy  to  lay  down  any  other  rule 
which,  under  the  circumstances  supposed,  could  be  fairly 
applied.  It  is  sometimes  suggested  that  the  shares  of 
partners  ought  to  be  proportionate  to  their  contribu- 
tions; but  without  in  any  way  denying  this,  it  may  be 
asked,  how  is  the  value  of  each  partner's  contribution 
to  be  measured  ?  Certainly  not  merely  by  the  capital  he 
may  have  brought  into  the  firm.  His  skill,  his  connec- 
tion, his  command  of  the  confidence  and  respect  of 
others,  must  all  be  taken  into  account;  and  if  it  is  im- 
possible to  set  a  money  value  on  each  partner's  contri- 
bution in  this  respect,  it  is  obviously  impossible  to  de- 
termine in  the  manner  suggested,  the  shares  of  the  part- 
ners in  the  partnership.  Nor  can  it  be  said  to  be  un- 
reasonable to  infer,  in  the  absence  of  all  evidence  to  the 
contrary,  that  the  partners  themselves  have  agreed  to 
consider  their  contributions  as  of  equal  value,  although 
they  may  have  brought  in  unequal  sums  of  money,  or 
be  themselves  unequal  as  regards  skill,  connection,  or 
character.  Whether,  therefore,  partners  have  contri- 
buted money  equally  or  unequally,  whether  they  are  or 
are  not  on  a  par  as  regards  skill,  connection,  or  char- 
acter, whether  they  have  or  have  not  laboured  equally 
for  the  benefit  of  the  firm,  their  shares  will  be  consid- 
ered as  equal,  unless  some  agreement  to  the  contrary  can 
be  shown  to  have  been  entered  into  (A;).1 
Meaning  of  When  it  is  said  that  the  shares  of  partners  are  prima 
equity. . 

(g)  See  Peacock  v.  Peacock,  16  Ves.  49  ;  McGregor  v.  Bain- 
bridge,  7  Ha.  164  ;  Binibrd  d.  Dommett,  4  Yes,  756. 

(h)  Stewart  v.  Forbes,  1  Mac.  &  G.  137  ;  Webster  v.  Bray,  7 
Ha.  159  ;  Copland  v.  Toulmin,  7  CI.  &  Fin.  349. 

(i)  Robinson  v.  Anderson,  20  Beav.  98,  and  7  Do  G.  M.  &  G. 
239  ;  Peacock  v.  Peacock,  16  Ves.  49  ;  Webster  v.  Bray,  7  Ha. 
159  ;  Farrar  v.  Beswick,  1  M.  Rob.  527. 

(ft)  See  the  last  three  notes.  Peacock  v.  Peacock,  2  Camp,  44, 
and  Sharpe  v.  Cummings,  2  Dowl.  &  L.  504,  which  was  appar- 
ently decided  on  its  authority,  cannot  be  supported.  See,  as  to 
Scotch  law.  Thompson  v.  Williamson,  7  Bli.  N.  S.  4:12  ;  3  Ross, 
L.  C.  on  Com.  Law  381. 


1  Ratzer  v.  Ratzer,  28  N.  J.  Eq.  136  (1877);  Northrup  v.  Mc- 
Gill,  27  Mich.  234  (1873);  Worthy  v.  Browev,  93  X.  Ca.  344 
(1885);  Ligarer.  Peacock,  109  111.  94  (1884);  Brewer  v.  Browne, 
68  Ala.  210  (1880);  Henry  v.  Bassett,  75  Mo.  89  (1881);  Ryder  v. 
Gilbert,  16  Hun.  163  (1878);  Wolfe  v.  Gilmer,  7  La,  Ann,  583 
(1852);  Honore  v.  Colmesnil,  1  J.  J.  Marsh  506  (1829). 


AMOUNT  OF  EACH  PARTNER'S  SHARES.  425 

facie  equal,  although  their  capitals  are  unequal,  what  Bk.  III. 

is  meant  is  that  losses  of  capital  like  other  losses  must  C;naP-5-  Sect. 

be  shared  equally  ;  but  it  is  not  meant  that  on  a  final  J 

settlement  of  accounts,  *  capitals  contributed  unequally  [  *  350] 
are  to  be  treated  as  one  aggregate  fund  which  ought  to 
be  divided  between  the  partners  in  equal  shares  (I). 

An  agreement  for  inequality  may  be  conclusively  in-  Evidence 
ferred  from  the  mode  in  which  the  partners  have  dealt  showing  in- 
with  each  other,  and  from  the  contents  of  the  partner-  equality. 
ship  books   (m).     Moreover,  if  an  agreement  for  ine- 
quality clearly  at  one  time  existed,  no  presumption  of 
any  alteration  in  this  respect  will  arise  from  the  mere 
fact,  that  some  of  the  original  members  have  retired. 
In  the  absence  of  evidence  to  the  contrary,  the  inference 
is  that  the  shares  of  the  retiring  members  have  been 
taken  by  the  continuing  parties  in   the   proportions  in 
which  these  last  were  originally  interested  in  the  con- 
cern (n). 

The  rule  that  the  shares  of  partners  are  equal,  unless  Rule  as  to 
tbey  have  otherwise  agreed,  applies  not  only  to  persons  presumptive 
who  are  partners  in  business  generally,  but  also  to  those  appHes'to 
who  are  partners  as  regards  one  single  matter  only.         partnerships 

Thus  in  Robinson  v.  Anderson  (o),  where  two  solici   in  single 
tors,  not  in  partnership,  were  jointly  retained  to  defend  transactions, 
certain  actions,  and  there  was  no  satisfactory  evidence  to  Robinson  v. 
show  in  what  proportions  they  were  to  divide  their  re- 
muneration, it  was  held  that  they  were  entitled  to  share 
it  equally,  although  they  had  been  paid  separately  and 
had  done  unequal  amounts  of  work.     The  Master  of  the 
Rolls,  after  observing  on  the  importance  in  such  cases 
of  attending  to  the  onus  probandi,  said  : 

"Now  I  should  entertain  no  doubt,  even  if  I  had  not  been  con- 
firmed by  the  two  cases  of  Webster  v.  Bray,  and  McGregor  v.  Bain- 
bridge,  that  where  two  solicitors  undertake  a  matter  of  business 
on  behalf  of  a  client,  the  same  rule  would  follow  in  that,  as  in 
any  other  undertaking  where  two  persons  carry  on  a  business 
jointly  on  behalf  of  themselves,  or  as  agents  of  other  persons.  It 
is,  in  point  of  fact,  a  limited  partnership  for  a  particular  sort  of 
business.  Assuming  nothing  to  have  been  said  as  to  the  manner 
in  which  the  profits  were  to  be  divided,  it  appears  to  me  to  fol-  . 
low  as  a  necessary  consequence  of  law,  that  they  are  to  he  divided 

(I)  See  infra,  ch.  8,  U,  on  partnership  accounts. 

(m)  As  in  Stewart  v.  Forbes,  1  Mac  &  G.  137. 

(«)  Robley  v.  Brooke,  7  Bli.  N.  S.  'JO  ;  and  see  Copland  V.  Toul- 
min,  7  CI.  &  Fin.  349. 

(o)  20  Beav.  98,  and  7  De  G.  M.  &  G.  239.  See,  too,  Webster 
v.  Bray,  7  Ha.  159,  and  McGregor  v.  Bainbridge,  ib.  KM,  note  ; 
Kanslipt'.  Kitton,  8  Jur.  X.  S.  835,  V.-C.  S. 


ihtt^ i  i> 


426  SHARES. 

Bk.  III.  equally  between  them.     And,  although  one  may  do  more  busi- 

Chap.5.  Sect.  ness  ;uui  ]iave  exerted  himself  more  *  than  the  other,  yet  if  noth- 

ing  is  said  upon  the  subject  of  profits,  the  presumption  is  that 

I"  *  351]  they  are  to  be  equally  divided  between  them.     It  appears  to  me 

that  if  the  clients  had  gone  to  Mr.  Robinson  and  Mr.  Andeison, 
and  said — We  wish  you  to  undertake  the  business  for  us,  and 
thereupon  Mr.  Robinson  and  Mr.  Anderson  had  both  said,  We 
agree  to  do  so,  and  nothing  had  taken  place  between  them  as  to 
the  manner  in  which  they  were  to  be  paid,  the  necessary  conse- 
quence would  have  been  that  after  payment  of  the  costs  out  of 
pocket,  the  net  profits  made  by  the  business  would  have  been 
divisible  equally  between  them,  and  that  neither  of  them  could 
say  to  the  other — I  have  done  more  business  than  you  have,  and 
am  therefore  entitled  to  a  larger  share  of  profits.  It  was  the  duty 
of  the  party  who  intended  that  this  should  not  be  a  partnership 
transaction,  and  that  he  should  be  paid  for  the  amount  of  busi- 
ness which  he  did  without  participating  in  that  of  the  other,  so 
to  express  himself." 

Applications  A  question  of  some  difficulty  arises  when  a  firm,  say 
of  rule  where  of  two  partners,  engages  in  a  partnership  speculation 
one  firm  wjtja  a  third  person  not  a  member  of  that  firm.      Is  the 

anothe^6*  interest  of  such  person  in  the  speculation  to  be  treated 
as  one-half,  the  other  two  persons  being  treated  as  one? 
or  is  the  interest  of  each  of  the  three  to  be  treated  as 
equal,  each  taking  one-third?  The  answer  to  these 
questions  must  depend  upon  whether  the  two  partners 
entered  into  the  speculation  as  a  firm  or  as  two  indi- 
viduals. If  the  former,  there  will  in  substance  be  only 
two  parties  interested  in  the  speculation,  and  the  pro- 
fits thereof  must  be  divided  into  two  equal  parts; 
whilst  if  the  latter  is  the  case,  there  will  be  three  par- 
ties interested,  and  the  profits  must  be  divided  into 
three  equal  parts  (p).1 


Section  III.  — Of  the  Lien  which  Each  Partner  has  on 
the  Property  of  the  Firm,  and  on  the  Shares  of 
His  Co-Partners. 

In  order  to  discharge  himself  from  the  liabilities  to 
which  a  person  may  be  subject  as  partner,  every  part- 
ner has  a  right  to  have  the  property  of  the  partnership 
applied  in  payment  of  the  debts  and  liabilities  of  the 

(p)  See  Warner  v.  Smith.  1  De  G.  J.  &  S.  337.  where  the  pr<  - 
fits  were  held  to  be  divisible  into  two  and  not  three  parts. 

1  Turnipseed  v.  Goodwin.  9  Ala.  372  (1846);  Honore  v.  Cole- 
mesnill,  J. J.,  Mar.  506  (1S29);  Conwell  v.  Sandidge,  5  Dana, 
210  (1837). 


partner's  liex.  427 

firm.     And  in  order  to  secure  a  *  proper  division  of  the  [  *  352] 
surplus  assets,  he  has  a  right  to  have  whatever  may  be  Bk.  III. 
due  to  the  firm  from  his  co-partners,  as  members  there-  Chap,  a.  Sect. 

of,  deducted  from  what  would  otherwise  be  payable  to  J 

them  in  respect  of  their  shares  in  the  partnership. 

In  other  words,  each  partner  may  be  said  to  have  an  Foundation 
equitable  lien  on  the  partnership  property  for  the  pur-  of  partners 
pose  of  having  it  applied  in  discharge  of  the  debts  of  Une• 
the  firm;  and  to  have  a  similar  lien  on  the  surplus  as- 
sets for  the  purpose   of  having  them   applied  in  pay- 
ment of  what  may  be  due  to  the  partners  respectively, 
after  deducting  what  may  be  due  from  them,  as  part- 
ners, to  the  firm  (q).1 

This  right,  lien,  quasi-  lien,  or  whatever  else  it  may  Conse- 
be  called,  does  not  exist  for  any  practical  purpose  un-  quencesof 
til  the  affairs  of  the  partnership  have  to  be  wound  up,  tlie  nen- 
or  the  share  of  a  partner  has  to  be  ascertained;  nor  has 
any  partner   a  right  to  insist  as  against  a  judgment 
creditor  of  the  firm,  that  he  shall  have  recourse  to  the " 
assets  of  the   firm   before  seeking   to   obtain  payment 
from  the  partners   individually  (r).     But  when  part- 
nership accounts  have  to  be   taken,  and  the  shares  of 
the  partners   have  to  be  ascertained,  the   lien  of  the 
partners  on  the  assets  of  the  partnership,  and  on  each 
other's   shares,   becomes   of    the    greatest   importance. 
"Whilst  the  partnership  lasts,  the  lien  attaches  to  every-  To  what 

thing-  that  can  be  considered  partnership  propertv.  and  property  it 

•        -  i    attaches 

is  not  therefore  lost  by  the   substitution  of  new  stock 

in  trade  for  old  (s).     Further,  on  the  death   or  bank- 
ruptcy of  a  partner,  his  lien  continues  in  favour  of  his 

{q)  West  v.  Skip,  1  Ves.  S.  239;  Skipp  v.  Harwood,  2  Swanst. 
586;  Doddington  v.  Hallet.  1  Yes.  S.  498  and  499;  Ex  parte  Ruf- 
fin.  6  Ves.  119;  Ex  parte  Williams,  11  ib.  3;  Holderness  v. 
Shackels,  8  B.  &  C.  012.  Smith  v.  De  Silva,  Cowp.  469,  can 
hardly  he  reconciled  with  the  other  cases,  but  see  upon  it  the 
observations  of  Lord  Tenterden,  in  8  B.  &  C.  618.  As  to  the 
right  of  a  minority  of  partners  to  insist  on  the  payment  of  a 
partnership  debt  out  of  the  partnership  assets,  see  the  observa- 
tions of  Turner,  V.-C,  in  Stevens  /.The  South  Devon  Rail.  Co., 
9  Ha.  326.  Any  member  of  an  ordinary  firm  is  at  liberty  to  pay 
any  debt  of  the  firm,  and  to  charge  the  firm  with  the  amount 
paid. 

(r)  See  ante,  p.  299. 

>  See  West  u.  Skip,  1  Ves.  S.  239;  Skipp  v.  Harwood,  2 
Swanst.  586;  Stocken  v.  Dawson,  9  Beav.  239,  and  17  L.J.  (Ch.) 
2.^:2.     Compare  the  cases  in  the  next  note  but  one. 

1  Hobbs  i'.  McLean,  117  U.  S.  567  (1885):  Priest  v.  Choteau, 
85  Mo.  398  (1885);  Burleigh  v.  White,  70  Me.  130  (1879);  War- 
ren v.  Taylor,  60  Ala.  218  "(1877);  Uhler  v.  Semple,  20  X.  J.  Eq. 
288  (1869):  Buchan  v.  Sumner,  2  Barb.  Ch.  165(1817);  Edwards 
v.  Remington,  60  Wis.  33  (1884). 


428 


SHARES. 


P.k.  III. 
Chap.  5.  Sect. 
3. 

[  *  353] 


Lien  exists 
only  on 
partnership 
assets. 


Lien  exists 
as  against  all 

persons 
claiming  a 
share  in  the 

assets. 


representatives  or  trustees,  and  does  not  terminate  un- 
til his  share  *has  been  ascertained  and  provided  for 
by  the  other  partners  (t).1  But  after  a  partnership 
has  been  dissolved,  the  lien  is  confined  to  wbat  was 
partnership  property  at  the  time  of  the  dissolution,  and 
does  not  extend  to  what  may  have  been  subsequently 
acquired  by  the  persons  who  continue  to  carry  on  the 
business.  In  this  respect  the  lien  in  question  differs 
from  the  lien  of  a  mortgagee  on  a  varying  stock-in -trade 
assigned  to  him  as  a  security  for  his  loan  (u). 

It  follows  from  the  pi'inciple  on  which  the  lien  of  a 
partner  is  founded,  that  it  only  extends  to  the  property 
of  the  firm,  and  to  the  separate  interest  of  each  partner 
in  such  property.2  In  those  cases,  therefore,  where 
there  is  a  partnership  in  profits  only,  but  that  which 
produces  those  profits  belongs  exclusively  to  one  of  the 
partners,  the  lien  of  the  others  is  confined  to  the  profits, 
and  does  not  extend  to  that  which  produces  them  (.r). 
Moreover,  if  two  persons  engage  in  a  joint  adventure, 
each  consigning  goods  for  sale  upon  the  terms  that 
each  is  to  have  the  produce  of  his  own  goods,  neither 
of  them  will  have  a  lien  on  the  goods  of  the  other,  nor 
on  the  produce  of  such  goods,  although  each  may  have 
raised  the  money  to  pay  for  his  own  goods  by  a  bill 
drawn  on  himself  by  the  other,  and  ultimately  dis- 
honoured (y). 

The  lien  of  each  partner  exists  not  only  as  against 
the  other  partners,  but  also  against  all  persons  claim- 
ing through  them  or  any  of  them  ;  and  it  is  therefore 
available  against  their  executors,  execution  creditors, 
and  trustees  in  bankruptcy  (z).  To  hold,  however, 
that  this  lien  could  be  enforced  against  persons  pur- 
chasing partnership  property,  would  be  in  effect  to 
prevent  any  sale  of  that  property  without  the  consent 
of  the  whole  firm,  and  would  practically  stop  all  part- 
nership trade.  Whilst,  therefore,  a  person  who  pur- 
chases a  share  of  a   partner  takes  that  share  subject  to 

{t)  See  Stocken  r.  Dawson.  9  Beav.  239.  affirmed  17  L.  J.  (Ch.) 
282,  and  the  cases  cited  in  note  (s). 

(u)  Pavne  v.  Hornby,  25  Beav.  280.  See.  too.  Nerat  r.  Bnrn- 
and,  4  Russ.  247,  and  2  Bli.  N.  S.  215,  ante,  p.  326;  Ex  parte 
Morley,  8  Ch.  1026.     Compare  the  cases  in  the  last  note  but  one. 

(x)  See  infra,  as  to  the  lien  of  co-owners. 

(y)  Ex  parte  Gemmel,  3  M.  D.  &  D.  198. 

(z)  West  v.  Skip,  and  other  cases  cited,  ante,  note  (s). 

1  Hoyt  r.  Sprague,  103  U.  S.  013  (1880);  Watkins  v.  Fakes,  5 
Heisk,'l85  (1871);  Edberts  v.  Wood,  3  Paige,  517  (18321. 

2  Mostellar  v.  Bost,  7  Ired.  Eq.  39  (1850);  Mann  v.  Higgins,  7 
Gill,  265  (1848). 


partner's  lien.  429 

the  liens  of  the  other  partners  («),'   a  *  person   who  [*354] 
bond  fide  purchases  from  one  partner  specific  chattels  Bk.  III. 
belonging   to   the  firm,  acquires   a   good   title  to  such  Chap.  5.  Sect. 

chattels,  whatever  liens  the  other  partners  might  have  J 

had  on  them  prior  to  their  sale  (t»).2 

In  Be  Lang  mead's  tmsts  a  partnership  between  A.  Re  Lang- 
and  B.  was  dissolved.  A.  retired,  and  by  deed  agreed  mead's 
to  execute  an  assignment  to  B.  of  the  partnership  lrusts- 
assets  (part  of  which  consisted  of  a  policy  of  which  the 
partners  were  assignees),  and  B.  agreed  to  covenant  to 
pay  the  partnership  debts,  and  idemnify  A.  against 
them.  No  further  instrument  was  executed.  A.  died, 
and  B.  afterwards  assigned  the  policy  by  way  of 
mortgage  to  a  person  wbo  had  notice  of  the  deed.  A.'s 
executors  were  afterwards  compelled  to  pay  partner- 
ship debts,  which  ought  to  have  been  discharged  by  B., 
and  B.  became  bankrupt.  The  policy  being  adversely 
claimed  by  the  mortgagee,  by  A.'s  executor,  and  by  a 
purchaser  from  B.'s  assignees,  it  was  held  that,  even  if 
A.  and  his  executors  bad  been  entitled  to  pursue  any 
portion  of  the  partnership  property  in  the  hands  of  B., 
and  to  have  it  applied  in  payment  of  the  partnership 
debts,  yet  that  they  had  no  such  right  as  against  the 
purchaser  from  B.,  though  with  notice,  for  he  was  not 
bound  to  see  to  the  application  of  the  purchase 
money  (c). 

The   lien  of   partners  on   the  partnership   property  No  lien  on  a 
extends,  as  has  been   stated,  to  whatever  is  due  to  or  Partner  s 
from  the  firm,  by  or  to   the  members  thereof,  as  such,  orclinarv 
It  does  not,  however,  extend  to  debts  incurred  between  debts  due 
the  firm   and    its    members,    otherwise  than    in    their  from  him  to 
character  of  members.      It  has  therefore  been  held  that  firm" 
where   a  partner   borrowed   money   from   the   firm  for 
some  private   purpose  of   his   own,    and    then   became 
bankrupt,  his  assignees  were   entitled   to   his   share   in 
the  partnership,  ascertained  without  taking  into  account 
the  sum  due  from   him  to  the  firm   in   respect  of  this 
loan ;    and   that   the   solvent   partners  were  driven   to 


(a)  Cavander  v.  Bulteel    9  Ch.  79. 

{!>)  See  Be  Langmead's  Trusts,  20  Bear.  20,  and  7  De  G.  M.  & 
G.  :]5:;. 
(c)  Ibid. 


1  Tarbell  v.  West,  86  N.  Y.  280  (1881)  ;  Burbank  v.  Wiley,  79 
N.  Ca.  501  (1878);  Beecher  v.  Stevens,  43  Conn.  587  (1876). 

2  Clark  v.  Rives.  33  Mo.  579  (1863).  The  following  cases  in- 
volve t lie  sale  of  the  firm's  chosesin  action.  Kull  v.  Thompson, 
38  Mich.  685  (1878),  Caulfield  v.  Sanders,  17  Cal.  569  (1861); 
McClelland  v.  Remsen,  30  Barb.  622  (1862). 


430  SHARES. 

Bk.  III.  prove  against  his  estate  in  order  to  obtain  payment  of 

Chap.  5.  Sect.  the  moEey  ient  (rf).' 

*  Further,  a  partner's  lien  on  partnership  property  is 

[  *  355]  lost  by  the  conversion  of  such  property  into  the  sepa- 
Lossoflien.  rate  property  of  another  partner.  Therefore,  if  ou  a 
dissolution  it  is  agreed  between  the  partners  that  the 
property  of  the  firm  shall  be  divided  in  specie  among 
them,  and  that  the  debts  shall  be  paid  in  some  speci- 
fied manner ;  and  if  the  property  is  accordingly  di- 
vided, but  the  debts  remain  unpaid,  the  lien  which 
each  partner  had  on  the  property  before  its  division  is 
gone  :  and  consequently  no  partner  has  aright  to  have 
the  specific  things,  allotted  to  any  other  partner,  brought 
bask  into  the  common  stock,  and  applied  in  liquidation 
of  the  partnership  liabilities  (e).2  Upon  the  same  prin- 
ciple, if  two  partners  consign  goods  for  sale,  and  direct 
the  consignee  to  carry  the  proceeds  of  the  sale  equally 
to  their  separate  accounts  without  any  reserve,  and  this 
is  done,  neither  partner  has  any  lien  on  the  share  of  the 
other  in  those  proceeds  ;  although  it  would  have  been 
otherwise  if  they  had  remained  part  of  the  common 
property  of  the  two  (/  ). 

(d)  See  Ryall  v.  Rowles,  1  Ves.  S.  348,  and  1  Atk.  165  ;  and 
Meliorucchi  v.  The  Royal  Exchange  Assur.  Co.,  1  Eq.  Ca.  Ab. 
8  ;  and  Croft  v.  Pike.  3  P.  W.  180.  Perhaps  Smith  v.  De  Silva, 
Cowp.  469,  was  decided  on  this  principle,  as  suggested  by  Lord 
Tenterden,  in  8  B.  &  C.  618 

(e)  Lingen  v.  Simpson,  1  Sim.  &  Stu.  600  ;  and  see  Er  Lang- 
mead's  Trusts.  7  De  G.  M.  &  G.  353,  the  judgment  of  L.  J.  Turner. 

(f )  See  Holroyd  v.  Griffiths,  3  Drew.  428.     In  Holderness  v. 

1  The  fact  that  a  creditor  happens  to  be  his  debtor's  partner, 
the  debt  not  arising  out  of  any  partnership  transaction,  does  not 
give  the  former  a  lien  as  partner  over  the  latter's  share  in  the 
firm's  assets.  Such  a  creditor  stands  in  no  better  position  than 
any  ordinary  separate  creditor.  Uhler  i\  Simple,  20  X.  J.  Eq. 
288  (I860);  Lewis  v.  Harrison,  81  Ind.  278  (1881);  Warren  v. 
Taylor,  60  Ala.  218  (1877);  Evans  v.  Bryan.  95  N.  Ca.  174  1886). 
In' Pierce  v.  Tiernan,  10  Gill  &  J.  253  (1838),  it  was  held  that 
one  partner  had  a  lien  on  his  co-partner's  interest  in  the  firm  for 
an  advance  made  the  latter  when  insolvent  for  the  purpose  of 
enabling  him  to  buy  the  goods  which  he  had  agreed  to  bring 
into  the  joint  venture.  It  is  a  matter  of  doubt  whether  an 
agreement  between  the  partners  at  the  time  the  loan  is  made 
that  the  lender  shall  have  a  lien  on  the  interest  of  the  borrower 
in  the  firm  will  confer  any  priority  on  the  former  as  to  his 
claim  on  this  account  over  the  separate  creditors  of  the  hitter. 
Lewis  v.  Harrison,  81  Ind.  278  (18811;  and  Cox  r.  Russell.  44 
Iowa,  556  (1876),  support  the  lien.  Hill  v.  Beach.  12  N.  J.  Eq. 
31  (1858),  denies  it. 

2  Clarke's  App.  107  Pa.  St.  436  (1884);  Giddings  v.  Palmer. 
107  Mass.  269  (1871);  Allen  v.  Grissom,  90  N.  Ca..90  1884  ; 
Vosper  v.  Kramer,  31  N.  J.  Eq.  420  (1879);  Emerson  v.  Parsons, 
46  N.  Y.  560  (1871).     See  note  l,p.  336. 


SALE  OF  SHARES  IX  PARTNERSHIPS.  431 

If  the  partnership   is    illegal  its   members   have  no  Bk.  III. 
lien  upon  their  common  property,  or  upon  each  other's  Chap.  o.  Sect. 

shares  therein  (g)  ;  unless  it  be  by  virtue  of  some  agree-  J 

ment  not  affected  by  the  illegality.  No  lien  if 

Mere  co-owners  have  no  such  lien  as  is  enjoyed  by  co-  partnership 
partners  (h).     But  a  part  owner  of  a  ship  has  a  right  g 

to  have  the  gross  freight  applied  in  the  first  place  in  owners 
payment  of  the  expenses  incurred  in  earning  it  (£). 


*  Section    IV. — Of  the  Mode  in    Which  a   Share     is  [  *  356] 
Taken  in  Execution  for  the  Separate  Debts  of  its 
Owner. 

The    nature    of    a  partner's  share    in    partnership  Execution 
property,  and  the  effect  of  the  lien  noticed  in  the  pre-  against  a 
ceding  sections,  are  well   seen  when    a  separate  judg-  Partner  tor  a 
ment  creditor  of  a  partner  seeks  to  levy  execution  upon  j^^t™ 
that  partners  share  in  the  partnership.     Such  a  credit- 
or has  always  been  at  liberty  to  execute  his  judgment, 
not  only  against  his  debtor's  separate  property,  but  also 
against  the  property  of  any  firm  in  which   the  debtor 
may  be  a  partner.     This  at  first  sight  seems  extremely 
unjust  ;  inasmuch  as  it  looks  like   taking  one    man's 
property    for   another   man's   debt  ;  but  in   truth   the 
creditor  gets  only  what  belongs  to  his  debtor,  although 
it  must  be  confessed  that  executions  of  the  nature  in 
question  put  the  debtor's  partners  to  no  small  incon- 
venience. 

In  order  to  explain  the  consequences  of  an  execution 
against  the  partnership  property  for  a  separate  debt  of 
one  of  the  partners,  it  will  be  convenient  to  examine 
the  law  as  it  stood  before  the  Judicature  acts  with 
reference  to 

1.  The  duty  of  the  sheriff. 

2.  The  position  of  the  purchaser  from  him. 

3.  The  position  of  the  execution  debtor. 

The  position  of  the  execution  creditor  and  of  his 

Shackels,  8  B.  &  C.  612,  the  transfer  to  each  partner  was  subject 
to  the  lien,  which  was  not  therefore  lost. 

(ff)  See  Ewing  v.  Osbaldison,  2  M.  &  Cr.  88. 

(h)  Re  Leslie.  23  Ch.  D.  552  ;  Kay  v.  Johnston,  21  Beav.  536  ; 
ante,  book  i.  ch.  1.  §  6. 

(i)  See  Green  v.  Briggs,  6  Ha.  395;  Alexander  r.  Simms,  18 
Beav.  80,  and  5  De  G.  M.  &  G.  57  ;  Lindsay  v.  Gibbs,  22  Beav. 
522,  and  3  De  G.  &  J.  690.  See.  as  to  the  lien  of  the  master  on 
freight,  Bristow  v.  Whitmore,  4  De  G.  &  J.  325,  reversing  S.  C. 
Johns.  96  ;  Smith  v.  Plummer,  1  B.  &  A.  582. 


432 


SALE  OF  SHAKES  IN  PARTNERSHIPS. 


Bk.  III.  debtor's  co-  partner  will  appear  in  the  course  of  this 

Chap.  5.  Sect,  examination.1 

The  effect  of  the  Judicature  acts  will  then  be  noticed. 


1. 


1.  Of  the 

duty  of  the 
sheriff. 


Sheriff  seizes 
the  partner- 
ship 

property. 


[  *  357] 


Heydon  v. 
Heydon. 


1.    Of  the  duty  of  the  Sheriff. 

There  has  been  considerable  doubt  as  to  the  proper 
mode  of  levying  execution  against  the  property  of  a 
firm  upon  a  judgment  recovered  against  one  of  its 
members  only  (k). 

Before  the  time  of  Lord  Mansfield  it  seems  that  the 
sheriff  was  in  the  habit  of  acting  upon  the  supposition 
that  each  partner  was  entitled  to  an  undivided  share 
of  every  article  belonging  to  the  firm,  without  reference 
to  the  state  of  the  partnership  accounts  :  and  in  'exe- 
cuting a  ft.  fa.  against  a  partner  for  his  *  separate 
debt,  the  sheriff  seized  the  whole  of  the  partnership  ef- 
fects (or  of  so  many  of  them  as  were  requisite),  and 
sold  the  undivided  share  of  the  judgment  debtor  there- 
in  (I). 

The  sheriff  seized  the  whole  of  every  chattel  which 
he  sold,  because  he  could  not  otherwise  seize  the  share 
of  the  execution  debtor.  But  he  did  not  sell  the  whole 
of  what  he  seized,  because  his  authority  was  limited  by 
the  writ  to  the  goods  and  chattels  of  the  debtor,  and 
an  undivided  share  can  be  sold  though  it  cannot  alone 
be  seized.  As  stated  by  Lord  Holt  in  Heydon  v.  Hey- 
don (m)  (where  there  were  two  partners,  against  one 
of  whom  a  judgment  had  been  obtained),  "the  sheriff 
must  seize  all  because  the  moieties  are  undivided;  for 
if  he  seize  but  a  moiety  and  sell  that,  the  other  will 
have  a  right  to  a  moiety  of  that  moiety:  but  he  must 

(k)  Burton  v.  Green,  3  Car.  &  P.  306. 

(l)  See  Hevdon  v.  Heydon,  1  Salk.  392  ;  Jackey  v.  Butler,  2 
Ld.  Raymond,  871  ;  Backhurstr.  Clinkard,  1  Show.  (K.  B.)169; 
Pope  v.  Hainan,  Comb.  217  ;  Marriott  v.  Shaw,  Comyn,  277  ; 
Dutton  v.  Morrison,  17  Ves.  205  ;  Re  Wait,  1  Jac.  &  W.  608. 

(to)  1  Salk.  392. 

1  On  the  subject  of  the  effect  and  operation  of  an  execution 
issued  against  the  partnership  property  for  the  separate  debt  of 
one  of  the  partners,  the  laws  of  the  several  states  differ  widely 
The  practice  is  to  a  very  great  extent  regulated  by  statute,  and 
seems  to  agree  in  no  two  states.  The  tendency  of  legislation 
and  judicial  decision  seems,  however,  to  be  in  the  direction  of 
permitting  only  the  interest  of  the  debtor  to  be  seized  by  the 
sheriff,  leaving  the  other  partners  in  possession  of  the  firm's 
assets,  subject,  of  course,  to  the  claims  of  partnership  creditors 
and  to  the  right  of  the  purchaser  of  the  interest  sold  by  the 
sheriff  to  insist  upon  a  winding  up  and  an  accounting  and  a  dis- 
tribution of  the  surplus  assets  remaining  after  payment  of  all 
the  firm's  indebtedness. 


UNDER  FIERI  FACIAS.  433 

seize   the  whole  and  sell  a  moiety  thereof  undivided,  Bk.  III. 
and  the  vendee  will  be  tenant  in  common  with  the  other  *-naP-  5-  Sect, 
partner"  (n).  J , 

Lord  Mansfield  endeavoured  to  introduce  what  at  Lord  Mans- 
first  sight  appears  to  be  a  more  equitable  practice.  In  fold's  in- 
his  time  the  sheriff  seems  to  have  seized  and  sold  the 
whole  of  a  sufficient  portion  of  the  partnership  goods 
(instead  of  selling  only  an  undivided  share  thereof  ), 
and  then  an  account  was  directed  to  be  taken  of  the 
judgment  debtor's  share  of  the  proceeds  of  the  sale, 
and  that  share,  or  a  sufficient  part  of  it,  was  handed 
over  to  the  execution  creditor  (o).  This,  however,  was 
a  very  imperfect  mode  of  proceeding;  for  it  was  im- 
possible to  ascertain  the  share  of  the  debtor  partner  in 
the  goods  seized,  without  taking  all  the  partnership  ac- 
counts, and  this  a  court  of  law  had  no  power  to  do. 
Lord  Mansfield's  innovation  was  therefore  discon- 
tinued (p);  and  it  was  finally  settled,  in  conformity  Modern  rule, 
with  the  older  cases,  that  the  sheriff's  duty  was,  and  it 
still  is,  *  to  seize  the  whole  of  the  partnership  effects  [  *  358] 
(seizable  under  a  fi.  fa.),  or  of  so  much  of  them  as  may 
be  requisite,  and  to  sell  the  undivided  share  of  the  debtor 
partner  therein,  without  reference  to  the  state  of  the 
accounts  as  between  him  and  his  co-partners  (q). 

The  sheriff,  having  seized  the  property  of  the  firm,  Sale  of 
proceeds  to  sell  the  interest  of  the  judgment  debtor  in  execution 
the  chattels  seized,  and  to  assign  the  same  to  the  pur-  S63, 0I  s 
chaser  (r).     Formerly  the  sale  had  to  be  by  auction,  but 
now  it  may  be  made  by  private  contract  (s). 

It  is  to  be  observed  that  the  sheriff  seizes,  sells,  and  Rights  of 
assigns;   but   he  has   no  business  to  take  the  goods  of  tne  other 
the  firm   out  of    the    possession  of    the    solvent    part-  P3™618, 
ners  (t)  ;  and  if  the   sheriff  sells  not  the  share  of  the 
execution  debtor,  but  the  goods   themselves,   he  is   ac- 

(n)  See,  too,  per  Tindal,  C.  J.,  in  Johnson  v.  Evans,  7  Man.  & 
Gr.  249,  250. 

(0)  See  Eddie?'.  Davidson,  2  Dougl.  650. 

(p)  See  Parker  v  Pistor,  3  Bos.  &  P.  288;  Chapman  v.  Koops, 
ib.  289;  Morley  v.  Strombom,  3  Bos.  &  P.  254.  Lord  Eldon 
greatly  disapproved  of  it,  see  Waters  v.  Taylor,  2  V.  &  B.  301. 

{q)  See  Helmore  v.  Smith,  35  Ch.  D.  436;  Holmes  v.  Mentze,  4 
A.  &  E.  127;  S.  C.  5  New  &  Man.  563,  and  4  Dowl.  Pr.  Ca.  300; 
Johnson  v.  Evans,  7  Man.  &  Gr.  240.  In  Holmes  v.  Mentze,  it 
was  held  that  a  sheriff,  who  for  the  debt  of  one  partner  executed 
a  fi.  fa.  against  the  property  of  the  firm,  was  not  entitled  to 
make  the  execution  creditor  and  the  co-partner  of  the  debtor 
interplead;  but  that  if  the  execution  creditor  denied  the  part- 
nership he  was  hound  to  indemnify  the  sheriff. 

(>•)  See  Hahershon  v.  Blurton,  l'De  G.  &  Sin.  121. 

(«)  See  Ex  parte  Villars,  9  Ch.  432. 

(1)  See   per  Patteson,  J.,  in  Burnell  v.  Hunt,  5  Jur.  650  Q.  B. 

*  5  LAW   OF   I'AirrXKKSHIP. 


434 


SALE  OF  SHARES  IN  PARTNERSHIPS. 


Bk.  III.  countable  to  the  solvent   partners   for   so  much  of  the 

Chap.  o.  Sect.  procee(js  0f  the  sale  as  is  proportional  to  their  share  in 
J the  partnership  (u). 


2.  Of  the 
purchaser 
from  the 
sheriff". 


[*359] 


Injunction. 


2.   Of  the  position  of  the  purchaser  from  the  sheriff. 

If  the  purchaser  is  a  stranger  unconnected  with  the 
firm,  he  acquires  for  his  own  benefit  all  the  judgment 
debtor's  interest  in  the  property  comprised  in  the  bill 
of  sale,  and  becomes,  as  regards  such  property,  tenant 
in  common  with  the  judgment  debtor's  co-partners  (x). 
The  next  step,  therefore,  is  to  adjust  the  conflicting 
rights  of  the  purchaser,  and  these  partners.  Now  it  is 
clear  from  the  nature  of  the  lien  which  each  partner 
has  on  the  partnership  property,  that  a  partner  holds  a 
partnership  chattel  with  his  co-  partner,  subject  to  all 
*the  equities  which  that  co  partner  has  upon  it  (y),  and 
subject  therefore  to  his  right  to  have  all  the  creditor's 
of  the  firm  paid  out  of  the  assets  of  the  firm,  and  con- 
sequently, pro  tanto,  out  of  the  chattels  seized  by  the 
sheriff  (z).  It  is  equally  clea?  that  in  this  respect  the 
purchaser  from  the  sheriff  is  in  no  better  position  than 
the  partner  whose  undivided  share  has  been  sold  (a). 
Before  the  Judicature  acts,  therefore,  a  suit  in  equity 
became  necessary,  in  order  that  the  partnership  accounts 
might  be  taken,  and  the  partnership  property  duly  ap- 
plied (6). 

The  right  of  the  partners  of  the  judgment  debtor 
being  of  the  nature  described,  and  it  being  incompatible 
with  that  right  that  the  partnership  property  seized  by 
the  sheriff  should  be  removed  or  sold  by  him,  the  Court 
of  Chancery  would,  before  the  Judicature  Acts,  on  a 
bill  filed  by  the  judgment  debtor's  co-partners  against 
the  judgment  debtor  and  his  creditor  and  the  sheriff, 
direct  the  partnership  accounts  to  be  taken,  and  re- 
strain the  sheriff  from  selling  the  property  and  appoint 
a  receiver  (c). 

(n)  Mayhew  v.  Herrick,  7  C.  B.  229. 

ix)  See  Helmore  v.  Smith,  35  Ch.  D.  436. 

(y)  Barker  v.  Goodair,  11  Ves.  85. 

(z)  See  the  next  note. 

(a)  Skipp  v.  Harwood,  2  Swanst.  586:  Taylor  v.  Fields,  4  Ves. 
396;  Young  r.  Keighly,  15  Ves.  557;  Dutton  v.  Morrison.  17  Ves. 
205-6;  Ex  parte  Hamper,  ib.  404-5;  iZe-Wait,  1  J.  &  W.  608. 

(6)  See  Parker  v.  Pistor,  3  Bos.  &  Pal.  288: 

(c)  See  Bevan  v.  Lewis,  1  Sim.  376.  As  to  an  injunction 
against  the  sheriff"  compare  Newell  v.  Townsend,  6  Si7n.  419, 
with  Garstin  v.  Asplin,  1  Madd.  150,  and  Jackson  r.  Stanhope, 
10  Jur.  676  ;  and  see  Story  on  Partn.  \  264  :  and  as  to  making 
the  sheriff' a  party,  see  Lord  Eldon's  obs.  in  Franklin  v.  Thomas, 
3  Mer.  235,  and  Hawksbaw  v.  Parkins,  2  Swanst.  549. 


UNDER  FIERI  FACIAS.  435 

3.   Of  the  position  of  the  execution  debtor.  Bk.  III. 

Chap.  5.  Sect. 

With  respect  to  the  execution  debtor,  it  is  to  be  ob-  4. 
served  that,  in  the  first  place,  the  execution  generally  (d)  3.  of  the  ex- 
operates  as  a  dissolution  of  the  partnership  (e).  In  the  ecution 
next  place,  the  assignment  by  the  sheriff  to  the  purchaser  debtor, 
transfers  to  the   purchaser  *  whatever  the  sheriff  had  [  *3'">0J 
power  to  assign,  and  did  assign,  but  no  more  ;  and  as, 
under  a  fi.  fa.,  the  sheriff  may  not  have  power  to  sell 
everything  which,  as  between  the  partners,  is  to  be  con- 
sidered partnership   property,  it  by  no   means  follows 
that  the  assignment  has  transferred  to  the  creditor  all 
the  judgment  debtor's  share  and  interest  in   the   part- 
nership  (/).     In  a   case,  therefore,  where  a  stranger 
purchased,  from  the  sheriff  the  execution  debtor's  inter- 
est, and  then  assigned  it  to  the  other  partners,  it  was 
held  that  the  execution  debtor  was  still   entitled  to   an 
account  from  them  ;  the  sale  by  the  sheriff  not  having 
divested  him  of  all  his  interest  in  the  concern  (g). 

Upon  a  sale  by  the  sheriff  of  the  interest  of  one  part-  Purchase  of 
ner  in  the  property  seized,  there  is  nothing  to  prevent  his  interest 
a  purchase  of  that  interest  by  his  co-partners.     But  the  by  "1S  co~ 

nurt  lie  rs 

co-partners   purchasing  of    the  sheriff  must   act  with 

perfect  fairness.      If  they  do  anything   to   conceal   the 

true  value  of  the  share,  so  as  to  enable  themselves  to 

buy  it  for  less  than  it  would  otherwise  have  fetched, 

the  sale  will  not  be  allowed  to  stand.     In  Perens  v.  perens  r 

Johnson  (h),  the   share    of  a    partner   in    a    leasehold  Johnson. 

colliery  was  sold  by  the  sheriff  under  a  fi.  fa.     The  sale 

was  by  auction.      The  other  partners  bought  the  share  ; 

the  execution  creditor  was  paid  off  ;  and  a  balance  was 

handed  over  by  the  sheriff  to  the  execution  debtor.      It 

appeared,  however,  that  before  the  sale  took  place,  it 

was  expected  that   a   valuable  seam  of  coal   would  be 

reached.  ;  that  the  solvent  partners  had  removed  the 

gear  so  as  to  prevent  any  one  going  down  the  mine  ; 

that   they  had   also  removed  some  ironstone  recently 

raised,  so  as  to  lead  persons  visiting  the  mine  to  believe 

that  coal  was  not  so  nearly  within  reach  as  it  was  ;   and 

(d)  Not  necessarily  in  all  cases  ;  see  Helmore  v.  Smith,  35  Ch. 
D.  436,  where  the  solvent  partner  (in  effect)  paid  out  the  sheriff 
with  partnership  monies. 

(e)  Aspinwall  v.  The  London  &  N.  W.  Rail.  Co.,  11  Ha.  325  ; 
Habershon  v.  Blurton,  1  De  G.  &  Sm.  121  ;  Skipp  v.  Harwood,  2 
Swanst.  587. 

(/)  See  Helmore  v.  Smith,  35  Ch.  D.  430. 

((/)  Habershon  v.  Blurton,  1  De  G.  &  Sm.  121. 

(h)  Perens  v.  Johnson,  and  Johnson  v.  Perens,  :!  Sm.  &G.  419. 
See,  also,  Smith  v.  Harrison,  26  L.  J.  Ch.  412,  V.-C.  W.,  where 
a  sale  by  the  sheriff  was  also  set  aside. 


creditor. 


436  SALE  OF  SHARES  IN  PARTNERSHIPS. 

Bk.  III.  that  a  few  days  after  the  sale,  and  after  only  one  day's 

Chap.  ;>.  Sect,  -workings  a  ricn  seam  of  coal  was   actually  discovered. 

J The  execution  debtor  thereupon  filed  a  bill   against  his 

late  co -partners,  praying  that  the  sale  might  be  set  aside, 
on  the  ground  that  the  purchase  from  the  sheriff  was 
contrary  to  that  good  faith  which  should  be  observed  by 
one  partner  towards  another;  and  a  decree  was  made  in 
[*361]        his  *  favour  setting  the  sale  aside  upon  repayment  of 

the  purchase-money,  with  interest  at  5Z.  per  cent. 
Purchase  Again,   if  the  solvent    partners  buy  the  execution 

with  partner-  debtor's  share  in  the  goods  seized  and  pay  for  it  out  of 
the  partnership  monies,  they  cannot  hold  the  share  for 
their  own  benefit  and  treat  the  execution  debtor  as  no 
longer  a  partner  or  interested  in  the  share  pur- 
chased (*'). 
Ripht  of  the  The  execution  creditor  has  no  title  to  goods  seized 
execution  under  a  fi.  fa.  issued  by  him,  unless  he  purchases  them 
from  the  sheriff.  Consequently  where,  under  a  fi.  fa. 
issued  against  one  partner  for  a  private  debt,  the  sher- 
iff seized  the  goods  of  the  firm,  which  afterwards  be- 
came bankrupt,  and  the  assignees  sold  the  goods  seized, 
it  was  held  that  an  action  by  the  execution  creditor 
against  the  assignees  for  money  had  and  received  to 
his  use,  would  not  lie;  first,  because  he  had  no  title  to 
the  goods;  and  secondly,  because  if  he  had,  his  inter- 
est in  them  could  not  be  ascertained  without  taking 
the  accounts  of  the  partnership  (k). 

4.  Jlodijicatioits  introduced  by  the  Judicature  acts. 

The  Judicature  acts  and  rules  promulgated  under 
them  do  not  unfortunately  contain  any  directions  ap- 
plicable to  the  subject  now  under  consideration.  Nor 
has  the  new  practice  under  them  yet  been  reduced  to 
shape.  The  writer  can  only,  therefore,  offer  the  fol- 
lowing suggestions  with  reference  to  their  combined 
effect: — 

1.  The  practice  must  be  the  same  in  all  divisions  of 
the  High  Court. 

2.  The  old  practice  must  be  adhered  to  so  far  as  it 
is  consistent  with  the  modern  procedure. 

3.  Some  form  of  procedure  must  be  adopted  which 
shall  have  the  effect  of  a  suit  for  an  account,  and  an 
injunction,  and  a  receiver. 

4.  There  appears  to  be  no  reason  why  the  sheriff 
should  not  proceed  to  seize  the  partnership  goods,  and 

(i)  Helmore  v.  Smith,  35  Ch.  D.  436,  where  the  assignment  by 
the  sheriff  was  set  aside. 

(Jfc)  Garbett  v.  Veale,  5  Q.  B.  408. 


TRANSFER  OF  SHARES  IN  PARTNERSHIPS.  437 

sell  the  execution  debtor's  share  as  before;    and  there  Bk.  III. 

is  in  strictness  no  more  *  necessity  for  him  to  inter-  9    P"  °  ,x''rt- 

plead  now  than  before  (7);  and  yet  as  no  order   for  his  _L_ 

withdrawal  can  be  made  in  his  absence,   a  proceeding  [*  362] 
by  him  in   the  nature  of    an   interpleader   summons, 
bringing  all  parties  interested  before  the  Court,  would 
probably  be  the  most  convenient  course  to  adopt. 

5.  Upon  a  seizure  by  the  sheriff  the  partners  of  the 
execution  debtor  should  obtain  an  order  dissolving  the 
partnership,  directing  the  sheriff  to  withdraw,  and  di- 
recting the  accounts  of  the  partnership  to  be  taken,  and 
the  value  of  the  execution  debtor's  interest  in  the  pro- 
perty seized  by  the  sheriff  to  be  ascertained,  and  ap- 
pointing a  receiver. 

'6.  After  the  accounts  have  been  taken,  and  the  above 
value  ascertained,  the  receiver  should  be  directed  to 
pay  the  amount  of  such  value  to  the  purchaser  from 
the  sheriff,  if  any,  and  the  rest  of  the  share  of  the 
execution  debtor  in  the  assets  of  the  partnership  to 
him.  If  the  share  has  not  been  sold  the  execution 
creditor  must  be  paid  out  of,  or  to  the  extent  of  the 
above  value.     The  receiver  can  then  be  discharged. 

7.  Whether  all  this  can  be  done  without  a  transfer 
to  the  Chancery  Division  is  not  clear;  but  probably  it 
very  often  may  be  done;  and  practically  a  sale  by  the 
sheriff  will  probably  be  frequently  dispensed  with.  A 
sale  usually  produces  great  hardship,  as  the  value  of 
the  share  sold  is  unknown;  and  its  sale  seldom  an- 
swers any  useful  purpose  except  that  of  getting  rid  of 
the  sheriff  (m). 

The  truth,  however,  is  that  the  whole  of  this  branch  Suggested 
of  the  laws  is  in  a  most  unsatisfactory  condition,  and  re-  alteration  of 
quires  to  be  put  on  an  entirely  new  footing.     The  sta-  tne  law- 
tutory  enactments  relating  to   charging  orders   should 
be  extended  to  all  cases  in  which  the  share  of  a   part- 
ner is  sought  to  be  taken  in  execution  for  a  separate 
debt  of  his  own. 


*  Section  V. — Of  the  Transfer  of  Shares.  [  *303] 

When  persons  enter  into  a  contract  of  partnership,  Transfer  of 
their  intention  ordinarily   is,  that   a  partnership  shall  shares, 
exist  between  themselves   and  themselves  alone.     The 
mutual  confidence  reposed  by  each  in  the  other  is  one 

(I)  See  ace.  W.  N.  1875,  p.  204. 

(m)  See  a  suggested  form  of  order  in  Seton  on  Decrees,  1214 
n.  (Ed.  4)  referred  to  in  Whetham  v.  Davey,  30  Ch.  D.  579. 


438  TRANSFER  OF  SHARES 

i'.k.  III.  of  the  main  elements  in  the  contract,  and  it  is  obvious 

Chap.  5.  Sect.  ^at  persons  may  De  willing  enough  to  trust  each  other, 

^ and  yet  be  unwilling  to  place  the  same  trust  in  any  one 

else.  Hence  it  is  one  of  the  fundamental  principles  of 
partnership  law  that  no  person  can  be  introduced  as  a 
partner  without  the  consent  of  all  those  who  for  the 
time  being  are  members  of  the  firm.  If,  therefore,  a 
partner  dies,  his  executors  or  devisees  have  no  right  to 
insist  on  being  admitted  into  partnership  with  the  sur- 
viving partners,  unless  some  agreement  to  that  effect  has 
been  entered  into  by  them  (m). 
Effect  of  Still  less  can  a  partner  by  assigning  his  share  entitle 

transfer.  his  assignee  to  take  his  place  in  the  partnership  against 

Effect  of         the  will  of  the  other  members  (n).1     The  assignment, 
assignment,     however,  is  by  no  means  inoperative:   on  the  contrary, 
it  involves  several  important  consequences,  more  espe- 
cially as  regards  the  dissolution  of  the  firm  and  the  right 
of  the  assignee  to  an  account  (o). 

1.  As  regards  As  regards  dissolution,  it  is  remarkable  that  there 
dissolution,  should  be  so  little  authority  to  be  found.  It  is  gen- 
erally stated,  that  if  a  member  of  an  ordinary  partner- 
ship transfers  his  share,  he  thereby  dissolves  the  part- 
nership; but  this  proposition  requires  qualification. 
The  true  doctrine,  it  is  submitted,  is  that  if  the  partner- 
ship is  at  will,  the  assignment  dissolves  it  (p);  and  if 
the  partnership  is  not  at  will,  the  other  members  are 
entitled  to  treat  the  assignment  as  a  cause  of  dissolu- 
tion. It  can  hardly  be  that  a  partner,  who  has  himself 
no  right  to  dissolve  or  to  introduce  a  new  partner,  can, 
by  assigning  his  share,  confer  on  the  assignee  a  right 

[  *  364]  to  have  the  accounts  of  the  firm  *  taken,  and  the  affairs 
thereof  wound  up,  in  order  that  he  may  obtain  the  ben- 
efit of  his  assignment. 

2.  x\.s  regards      Although  a  partner  cannot,  by  transferring  his  share, 
account.  force  a  new.  partner  on  the  other  members  of  the  firm 

without  their  consent,  there  is  nothing  to  prevent  a 
partner  from  assigning  or  mortgaging  his  share  without 
consulting  his  co-partners;  and  if  a  partner  does  assign 

(m)  Pearce  v.  Chamberlain.  2  Ves.  S.  33  ;  Crawford  v.  Hamil- 
ton. 3  Madd.  254  ;  Bray  v.  Fromont,  6  ib.  5  ;  Crawshay  v.  Maule, 
1  Swanst.  495  ;  Tatam  v.  Williams.  3  Ha.  347. 

(n)  See  Jefferys  v.  Smith,  3  Russ.  158. 

(o)  In  Marshall  v.  McClure,  10  App.  Ca.  325,  a  surrender  of  a 
partner's  share  in  property  mortgaged  was  held,  under  special 
circumstances,  to  include  the  firm's  share. 

(p)  See  Heath  v.  Sansom,  4  B.  &  Ad.  172. 

1  Mason  v.  Connell,  1  Whart.  381  (183G):  Miller  v.  Bringham, 
50  Cal.  615  (1875);  Bank  v.  R.  R.  Co.,  11  Wall.  624(1870);  Mer- 
rick v.  Braiuard,  38  Barb.  574  (1860). 


IN  PARTNERSHIPS.  439 

or  mortgage  his  share,  he  thereby  confers  upon  the  as-  Bk.  III. 
signee  or  mortgagee  a  right  to  payment  of  what,  upon  ^naP-  5.  Sect. 

taking  the  accounts  of  the  partnership,  may  be  due  to  !_! 

the  assignor  or  mortgagor  (g).1  But  the  assignee  or 
mortgagee  acquires  no  other  right  than  this  (r) ;  and 
he  takes  subject  to  the  rights  of  the  other  partners;  and 
will  be  affected  by  equities  arising  between  the  assignor 
and  his  co- partners  subsequently  to  the  assignment  (s).2 
Even  if  the  assignee  gives  notice  of  the  assignment,  he 
cannot  (if  the  partnership  is  for  a  term)  acquire  a  right 
to  the  assignor's  share  as  it  stands  at  the  time  of  the 
assignment  or  notice,  discharged  from  subsequently 
arising  claims  of  the  other  partners  (t).  The  assign- 
ment cannot  deprive  them  of  their  right  to  continue  the 
partnership,  and  consequently  to  bring  subsequent  deal- 
ings and  transactions  into  account.  It  seems,  however, 
that  an  assignee  of  a  share  in  a  partnership  can  compel 
the  other  partners  to  come  to  an  account  with  him  (u)f 
but  the  analogy  furnished  by  sub-partnerships  leads  to 
the  inference  that  the  assignee  must,  to  use  Lord  Eldon's 
language,  be  satisfied  with  the  share  of  the  profits  aris- 
ing and  given  to  the  assignor  (x). 

If  partners  choose  to  agree  that  any  of  them  shall  be  Transfer 
at  *  liberty  to  introduce  any  other  person  into  the  part-  [  *  365] 
nership,  there  is  no  reason  why  they  should  not;  nor  allowed  by 
why,  having  so  agreed,  they  should  not  be  bound  by 

(q)  Whetham  v.  Davey,  30  Ch.  D.  574  ;  Glyn  r.  Hood,  1  Gift". 
328,  and  1  De  G.  F.  &  J.  334.  See,  also,  Cassels  v.  Stewart,  6 
App.  Ca.  73. 

(»•)  Smith  v.  Parkes,  16  Beav.  115. 

(.s)  See  Cavander  v.  Bulteel,  9  Ch.  78  ;  Lindsay  v.  Gibbs,  3  De 
G.  &  J.  690  ;  Guion  v.  Trask,  1  De  G.  F.  &  J.  379,  per  Turner,  L. 
J.  See,  also,  Re  Knapman,  18  Ch.  D.  300  ;  Bergmann  v.  Mc- 
Millan, 17  ib.  423  ;  Morris  v.  Livie,  1  Y.  &  C.  C.  380. 

(t)  See  Bergmann  r.  McMillan,  17  Ch.  D.  423  ;  Cavander  v. 
Bulteel,  9  Ch.  78  ;  Kelly  v.  Hutton,  3  Ch.  703  ;  Kedmayne  v. 
Forster,  2  Eq.  467. 

(ft)  See  Whetham  v.  Davey,  30  Ch.  D.  574  ;  Glyn  v.  Hood  and 
Kelly  v.  Hutton,  tibi  supra.  But  Kelly  v.  Hutton  appears  to  have 
been  a  case  of  co-ownership  in  a  newspaper  and  a  partnership  in 
its  profits. 

(x)  See  ante,  p.  48  ;  and  Brown  v.  De  Tastet,  Jac.  284,  where 
the  bill  was  dismissed  against  the  other  partners. 

1  See  page  340  ;  note  1. 

2  Hiscock  ?).  Phelps,  49  N.  Y.  97  (1872);  Bank  v.  Sawver.  38 
Oh.  St..339  (1882);  Receivers  v.  Godwin.  5  X.  J.  Eq.  334  (1846); 
Burbank  v.  Wiley,  79  X.  Ca.  501  (1878);  Churchill  v.  Prostor,  31 
Minn.  129  (1883). 

3  Gyger's  Appeal,  62  Pa.  St.  73  (1869);  Bank  v.  Railroad  Co., 
11  Wall.  624  (1870);  Mathewson  v.  Clarke,  6  How.  1:2-2  |1S48); 
Fellows  r.  Greenleaf;  43  N.  H.  421  (1802);  Miller  v.  Brigham,  50 
Cal.  615  (1875). 


agreement. 


440 


TRANSFER  OF  SHARES 


Lovegrove  v. 
Nelson. 


Bk.  III.  the  agreement  (?/).     Persons  who  enter  inlo  such  an 

Chap.  5. Sect,  agreement  consent  prospectively  and  once  for  all  to  ad- 

J mit  into  partnership  any  person  who  is  willing  to  take 

advantage  of  their  agreement,  and  to  observe  those  stip- 
ulations, if  any,  which  may  be  made  conditions  of  his 
admission.  Such  an  agreement  as  this  is  the  basis  of 
every  partnership  the  shares  in  which  are  transferable 
from  one  person  to  the  other.  Those  who  form  such 
partnerships,  and  those  who  join  them  after  they  are 
formed,  assent  to  become  partners  with  any  one  who  is 
willing  to  comply  with  certain  conditions  (z). 

As  observed  in  Lovegrove  v.  Nelson  (a),  "  To  make  a 
person  a  partner  with  two  others  their  consent  must 
clearly  be  had,  but  there  is  no  particular  mode  or  time 
required  for  giving  that  consent ;  and  if  three  enter 
into  partnership  by  a  contract  which  provides  that  on 
one  retiring,  one  of  the  remaining  two,  or  even  a  fourth 
person  who  is  no  partner  at  all,  shall  name  the  successor 
to  take  the  share  of  the  one  retiring,  it  is  clear  that 
this  would  be  a  valid  contract  which  the  Court  must 
perform,  and  that  the  new  partner  would  come  in  as 
entirely  by  the  consent  of  the  other  two  as  if  they  had 
adopted  him  by  name." 

Where  a  partner  has  an  unconditional  right  to  trans- 
fer his  share,  he  may  transfer  it  to  a  pauper,  and  thus 
get  rid  of  all  liability  as  between  himself  and  his  co- 
partners in  respect  of  transactions  subsequent  to  the 
transfer  and  notice  thereof  given  to  them  (6).  But 
even  in  this  case  the  transfer  alone  does  not  render  the 
transferee  a  member  of  the  partnership,  and  liable  as 
between  himself  and  the  other  members  to  any  of  the 
debts  of  the  firm  (c).  In  order  to  render  him  a  partner 
with  the  other  members,  they  must  acknowledge  him 
to  be  a  partner,  or  permit  him  to  act  as  such  (d). 
As  an  ordinary  partnership  is  not  distinguishable 
the  persons   composing   it,  and  as  every  change 


Effect  of 
transfer 
where 
there  is  a 
right  to 
assign. 


Effect  on 
continuity  of  from 


firm. 
[  *  366] 


amongst  those  *  persons  creates  a  new  partnership,1  it 
follows  that  every  time  a  partner  transfers  his  share  to 
a  non-partner  the  continuity  of  the  firm  is  broken.  In 
this  respect  such  companies  as   are   not  mere  partner - 

(y)  Lovegrove  ?>.  Nelson,  3  M,  &  K.  20, 
(z)  See  Fox  v.  Clifton,  <J  Bing.  119. 

(a)  3  M.  &  K.  1. 

(b)  Jefferys  v.  Smith,  2  Euss.  158. 

(c)  Ibid.  (rf)  Ibid. 


1  Clark  v.  Wilson,  1!)  Pa.  St.  414  (1852);  Peters?-.  McWilliams, 
78  Va.  567  (1884);  Morse  v.  Gleason,  04  N.  Y.  204  (1876);  Ross 
v.  Cornell,  45  Cal.  133  (1872);  Mudd  v.  Bast,  34  Mo.  465  (1864). 


IN  PARTNERSHIPS.  441 

ships  on  a  large  scale  differ  from  ordinary  firms,  their  Bk.  III. 
continuance  not  being  interrupted  by  changes  amongst  pnaP-  5.  Sect, 
their  members  e).  _J 

An  apparent  exception  to  the  rule  that  a  share  in  a  Mining  part- 
partnership  cannot  be  transferred  without  the  consent  nerships. 
of  all  the  partners  exists  in  the  case  of  mining  partner- 
ships. Mines  are  a  peculiar  species  of  property,  and 
are  in  some  respects  governed  by  the  doctrines  of  real 
property  law,  and  in  others  by  the  doctrines  which 
regulate  trading  concerns.  Regarding  them  as  real 
property,  and  their  owners  as  joint  tenants  or  tenants 
in  common,  each  partner  is  held  to  be  at  liberty  to 
dispose  of  his  interest  in  the  land  without  consulting 
his  co-owners  ;  and  a  transfer  of  this  interest  confers 
upon  the  transferee  all  the  rights  of  a  part-owner,  in- 
cluding a  right  to  an  account  against  the  other 
owners  (/).  But  even  here,  if  the  persons  originally 
interested  in  the  mine  are  not  only  part-owners  but 
also  partners,  a  transferee  of  the  share  of  one  of  them, 
although  he  would  become  a  part- owner  with  the  others, 
would  not  become  a  partner  with  them  in  the  proper 
sense  of  the  word,  unless  by  agreement  express  or 
tacit  (g).1 

Similar  observations  apply  to  transfers  of  shares  in  Ships. 
ships. 

(e)  See  Mayhew's  case,  5  De  G.  M.  &  G.  837. 

(/)  See  Bentley  v.  Bates,  4  Y.  &  C.  Ex.  182;  Redmayne  v. 
Forster,  2  Eq.  467. 

{g)  As  in  JefTerys  v.  Smith,  3  Russ.  158 ;  Crawshay  v.  Maule,  1 
Swanst.  518. 


1  It  is  said  that  death  does  not  cause  the  dissolution  of  such  a 
firm  and  that  the  assignment  of  his  share  therein  by  one  of  its 
members  will  not  dissolve  it.  Lemar  v.  Hale,  79  Va.  147  (1884), 
Kahn  v.  Central  Smelting  Co.,  102  U.  S.  641  (1881);  Nisbet  v. 
Nash,  52  Cal.  540  (1878);  Campbell  v.  Colorado  Coal  &  Iron  Co., 
9  Col.  60  (1885). 


442  CONTRIBUTION  AND  INDEMNITY. 


[  *  367]  *  CHAPTER  VI. 

OF  CONTRIBUTION  AND  INDEMNITY  WITH  REFERENCE 
TO  PARTNERSHIPS. 

Bk.  III.  In  this  chapter  it  is  proposed  to  consider  the  nature 

Chap.  6.  of  those    expenses   and   losses  which,  as  between    the 

S  b'ectof       members  of  a  firm,  are  chargeable  to  the  firm,  and  also 
present  the  nature   of  those    which    are   properly    chargeable 

chapter.  against  some  one  or  more  of  the  members  exclusively 

of  the  others.  In  other  words,  it  is  proposed  to  inves- 
tigate the  principles  upon  which,  in  taking  the  accounts 
of  a  firm,  a  given  expense  or  loss  is  to  be  placed  to  the 
debit  of  the  firm,  or  to  the  debit  of  one  or  more  of  its 
members  separately. 

In  connection  with  this  subject  it  must  always  be 
borne  in  mind  that  every  member  of  an  ordinary  firm 
is,  to  a  certain  extent,  both  a  principal  and  an  agent. 
He  is  liable  as  a  principle  to  the  debts  and  engagements 
of  the  firm,  and  in  respect  of  them  he  is  entitled  to  con- 
tribution from  his  co  partners  ;  for  they  have  no  right 
to  throw  on  him  alone  the  burden  of  obligations  which, 
ex  hypothesi,  are  theirs  as  much  as  his  (a).1  Again, 
each  member  as  an  agent  of  the  firm  is  entitled  to  be 
indemnified  by  the  firm  against  losses  and  ex- 
penses bond  fide  incurred  by  him  for  the  benefit  of  the 
firm,  whilst  pursuing  the  authority  conferred  upon  him 
by  the  agreement  entered  into  between  himself  and  his 
co-partners.  On  the  other  hand,  a  partner  has  no  right 
to  charge  the  firm  with  losses  or  expenses  incurred  by 
his  own  negligence  or  want  of  skill,  or  in  disregard  of 
the  authority  reposed  in  him  (b). 

The  above  general  principles  are  the  basis  of    the 
whole  of  this  branch  of  partnership  law  ;  but  in  order 
[  *  3681        to  apply  them  *  correctly  to  the  infinite  variety   of  cir- 
cumstances which  occur  in  the  ordinary  course  of    life, 
it  will  be  convenient  to  notice  the  leading  doctrines  on 

(«)  See  Robinson's  case,  6  De  G.  M.  &  G.  572  ;  Spottiswoode's 
case,  ib.  345  ;  Lefroy  v.  Gore,  1  Jo.  &  Lat.  571. 

(b)  Thomas  v.  Atherton,  10  Ch.  D.  185  ;  Burry  v.  Allen,  1 
Coll.  604. 


1  Downs  v.  Jackson,  33  111.   464  (1864)  ;  Forbes  v.  Webster,  3 
Vt.  58  (1829). 


CONTRIBUTION  AND  INDEMNITY.  443 

the  subject  of  contribution  and  indemnity  generally,  and  Bk.  III. 
then  to  allude  more  particularly  to  the  rights  of   part-  Chap.  6.  Sect. 

ners  with  respect  to  compensation  for  trouble  ;  outlays  J . 

and  advances;  debts,  liabilities,  and  losses  and  interest. 


Section  I. — General  Observations. 
Foundation  of  the  right  to  contribution. 

Whether  a  person  who  has  suffered  loss  is  entitled  to  The  right  of 
be  indemnified  wholly  or  partly  by  others,  is  a  question  contnbu- 
which  cannot  be  decided  in  the  negative  merely  upon 
the  ground  that  no  agreement  for  contribution  or  in- 
demnity has  been  entered  into.  An  agreement  may 
undoubtedly  give  rise  to  a  right  to  indemnity  or  con- 
tribution ;  but  the  absence  of  an  agreement  giving  rise 
to  such  a  right,  is  by  no  means  fatal  to  its  existence. 
The  general  principle  which  prescribes  equality  of  bur- 
den and  of  benefit,  is  amply  sufficient  to  create  a  right 
of  contribution  in  many  cases  in  which  it  is  impossible 
to  found  it  upon  any  genuine  contract,  express  or  tacit. 
The  common  feature  of  such  cases  is,  that  one  person 
has  sustained  some  loss  which  would  have  fallen  upon 
others  as  well  as  upon  himself,  but  which  has  been 
averted  from  them  at  his  expense  ;  for  example,  where 
one  tenant  in  common  repairs  the  common  property, 
and  so  saves  it  from  destruction  (c)  ;  where  one  of  sev- 
eral sureties  pays  a  debt  for  which  all  are  liable  (d)  ; 
where  one  person  has  his  goods  thrown  overboard  in 
order  to  save  the  ship  and  the  rest  of  its  cargo(e).  In 
all  these  cases  a  right  of  contribution  arises  ;  not  by 
virtue  of  any  contract,  but  because  the  safety  of  some 
cannot  justly  be  purchased  at  the  expense  of  others  ; 
and  all  must  therefore  contribute  to  the  loss  sus- 
tained (  /). 

*  Again,  where  one  man's  goods  have  been  lawfully  r  *  369] 
seized  for  the  debt  of  another,  the  owner  of  the  goods 
has  a  right  to  redeem  them  and  to  be  indemnified  by 
the  debtor  (g). 

(c)  Ante,  p.  60. 

(rf)  Bering  r.  Winehelsea,  1  Cox,  31 8. 

(e)  Abbott  on  Shipping,  part.  iv.  ch.  10  ;  and  part  vi.  ch.  1, 
ed.  12. 

(/)  Lefroy  v.  Gore,  1  Jo.  &  Lat.  571  ;  Spottiswoode's  case.  6 
De  G.  M.  &'G.  345  ;  Ashurst  v.  Mason.  20  Eq.  225,  a  case  of  co- 
directors.  See,  too,  the  cases  in  1  Eq.  Ca.  Ab.  Contribution 
and  Average,  and  in  the  note  to  Averall  v.  Wade,  LI.  &  Gould 
(temp.  Sug. ).  '.'o'4. 

(g)  Edmunds  v.  Wallingford,  14  Q.  B.  D.  811. 


444 


CONTRIBUTION  AND  INDEMNITY. 


Bk.  III. 
Chap.  6.  Sect. 
1. 

Exclusion  of 
right  by 
agreement. 


Exclusion  of 
right  by 
fraud. 


But  although  a  right  to  contribution  may  exist  where 
there  is  no  contract  upon  which  it  can  be  founded,  it 
cannot  exist  if  excluded  by  agreement;  and  it  is  so  ex- 
cluded whenever  those  who  would  otherwise  be  contribu- 
tories  have  entered  into  any  contract,  express  or  tacit, 
amongst  themselves,  which  is  inconsistent  with  a  right 
on  the  part  of  one  to  demand  contribution  from  the 
others  (h).  This  is  too  obvious  to  require  comment, 
but  it  must  be  borne  in  mind  as  qualifying  the  common 
saying,  that  the  right  to  contribution  is  independent  of 
agreement. 

Again,  a  right  to  contribution  may  be  excluded  by 
fraud,  as  is  the  case  where  a  person  induces  another  by 
false  and  fraudulent  representations  to  join  him  in  part- 
nership. In  such  a  case  the  person  defrauded  has  a 
right  to  rescind  the  contract  of  partnership,  and,  as  be- 
tween himself  and  co  partner,  to  throw  all  the  partner- 
ship losses  upon  the  latter  alone  (i). 


Agent's 
eight  to  in- 
demnity. 


[*370] 


1.  When  he 
obeys  his  in- 
structions. 


Of  the  right  of  agents  and  trustees  to  indemnity  from 
their  principals  and  cestuis  que  trustent. 

In  order  to  clear  the  way  for  the  discussion  of  the 
right  of  a  partner  to  be  indemnified  by  his  firm,  it  is 
necessary  to  advert  shortly  to  the  right  of  agents  and 
truslees  to  be  indemnified  by  their  principals  and  cestuis 
que  trustent. 

"With  respect  to  agents  the  following  cases  have  to  be 
considered. 

1.   When  the  agent  having  instructions  executes  them ; 

*  2.  When  the  agent  having  instructions  does  not  fol- 
low them; 

3.  When  the  agent  having  no  instructions  acts  never- 
theless for  his  principal. 

1.  With  respect  to  the  first  of  these  three  classes  of 
cases,  nothing  is  clearer  than  that  an  agent  who  has  in- 
structions to  act  in  a  certain  manner,  is  entitled  be  re- 
imbursed by  his  principal  for  all  outlays  made  in  pur- 
suance of  these  instructions,  and  to  be  indemnified  for 
any  loss  sustained  by  executing   them   (k).     Even   if 

(/<)  As  in  Gillan  r.  Morrison,  1  De  G.  &  S.  421 ;  Re  The  Wor- 
cester Corn  Exchange  Co.,  3  De  G.  M.  &  G.  180. 

(i)  See  Newbiggiiig  v.  Adam.  34  Ch.  D.  582;  Pillars  v.  Hark- 
ness,  Colles,  442;  Rawlins  v.  Wickham,  1  Giff.  355,  and  3  De  G. 
&  .1.  304,  noticed  hereafter  under  the  head  Rescission  of  Contract. 
See,  too,  Carew's  case,  7  De  G.  M.  &  G.  4  2. 

(k)  Story  on  Agency,  ?  335  et  seq. ;  Paley  on  Agency,  ch.  2  ; 
Smith,  Merc.  Law,  pp.  119,  120,  ed.  9;  Curtis  r.  Barclay,  5  B.  & 
C.  141.     See,  also,   Ireland  v.  Liviugstone,  L.  R.  5  Ho.  Lo.  416. 


CONTRIBUTION  AND  INDEMNITY.  445 

what  the  agent  does  is  unlawful   he  is  entitled  to  in-  Bk.  III. 
deinnity  (?);  unless,   indeed,  the  act  be  one -which  the  Chap.  6.  Sect. 

agent  must  have  known  his  principal  could  under  no  J 

circumstances  justify;  for  then  the  maxim  in  pari  de- 
licto melior  est  positio  defendentis  applies,  and  the  agent 
can  obtain  no  indemnity  from  a  court  of  justice  (in). 

2.  It  is   equally  clear  that,   speaking  generally,   an  2.  When  he 
agent  who  acts  contrary  to  his  instructions  is  not  enti-  disobeys  his 
tied  to  any  indemnity  or  reimbursement   for  losses  or  ms  ruc  lons' 
expenses  incurred  whilst  so  acting  (n).     Even  although 
the  instructions   may  have  been  given  by  the  principal 
under  a  misapprehension  of  facts,  and  the  agent,  being 
aware  that  such  was  the  case,  may  have  acted  bond  fide 
for  the  benefit  of  his  principal  (o),  still  the  agent  will 
not  be  entitled  to  indemnity;  for  it  is   the  duty  of  an 
agent  to  obey  and  not  to  disregard  his  orders.     But  if 
the  principal  chooses  to  ratify  the  agent's  conduct,  the 
latter  acquires  a  right  to  be  considered  as  having  acted 
in  pursuance    of    instructions,  and   to    be    entitled  to 
reimbursement    and  indemnity   *  accordingly;    for  the  [*  371] 
principal  cannot,  whilst  ratifying  the  agent's  conduct 
so  far  as  it  is  beneficial,  repudiate  it  so  far  as  it  is  oner- 
ous (p). 

The  position  of  an  agent  who  has  already  acted  on  Effect  of 
his  instructions,  and  has  thereby  incurred  a  legal  obli-  revocation  of 
gation  to  third  parties,  is  different.      The  better  opin-  authority. 
ion  is  that  in  this  case  he  is  not  bound  on  the  command 
of  his  principal   to  stop  short  and  refuse  to  perform 
the   obligation   incurred.     There   is  no  doubt  that,  as 
between  himself  and  his  principal,  an  agent  is  entitled 
to  obey  the  counter  order,  and  to  obtain  a  full  indem- 
nity from  the  consequences  of  so  doing.      But  it  is  ap- 
prehended that  he  is  at  liberty  so  far  to  carry  out  the 
instructions  on  which  he  has  begun  to  act,  as  may  be 
necessary  to  relieve  himself   from  all   the  legal  liabili- 
ties   incurred  before   notice   of  the  countermand,  and 

as  to  ambiguous  instructions.  As  to  costs  of  actions  unsuccess- 
fully defended,  see  Broom  v.  Hall,  7  C.  B.  N.  S.  503. 

(/)  Adamson  v.  Jarvis,  4  Bing.  66:  Betts  v.  Gibbins,  2  A.  &  E. 
57;  per  Tindal.  C.  J.,  in  Collins  v.  Evans,  5  Q.  B.,  830.  See.  as 
to  conforming  to  an  illegal  custom  unknown  to  the  principal, 
Perry  v.  Barnett,  15  Q.  B.  D.  388. 

(m)  See  Merryweatner  v.  Nixan,  2  Sm.  L.  C. ;  Collins  v.  Blan- 
tern,  1  ib. ;  Joseph  v.  Pebrer,  3  B.  &  C.  639;  Shackell  v.  Rosier,  2 
Bing.  N.  C.  634. 

(n)  See  Stokes  v.  Lewis,  1  T.  R.  20;  Galwav  V.  Mathew.  10 
East,  264;  Child  v.  Morley,  8  T.  R.  610;  Warwick  v.  Slade,  3 
Camp.  1-27. 

(o)  Howard  v.  Tucker,  1  B.  &  Ad.  712. 

(;>)  Story  on  Agency,  \  250. 


446 


DISTRIBUTION  AND  INDEMNITY. 


Bk.  III. 

Chap.  6.  Sect, 
1. 


3.  When  he 
acts  without 
instructions. 


[*372] 


Rights  of  a 


having  done  so,  to  insist  upon  indemnity  and  reim- 
bursement as  if  the  principal  had  not  changed  his  in- 
structions. Nemo  potest  mutare  consilium  suum  in  al- 
terius  injuriam  is  the  maxim  of  the  civil  law,  and  ex- 
presses the  correct  principle  for  the  decision  of  these 
cases  (q).  * 

3.  There  remains  the  third  class  of  cases,  viz.,  where 
the  agent,  having  no  instructions  to  guide  him,  acts 
for  his  principal,  and  then  seeks  to  be  indemnified  by 
him.  Now,  here,  as  in  the  last  class  of  cases,  ratifica- 
tion by  the  principal  removes  all  difficulty,  and  may 
be  excluded  from  consideration.  Again,  an  agent  hav- 
ing no  specific  instructions  may  yet  have  an  implied 
authority  to  act  in  a  given  way  for  his  principal;  and 
in  the  absence  of  orders  to  the  contrary,  an  agent  al- 
ways has  implied  authority  to  act  in  the  manner  in 
which  he  has  been  accustomed  to  act  with  the  approval 
of  his  principal;  and  to  act  with  respect  to  any  matter 
as  other  persons  situate  like  himself  usually  act  with 
respect  to  similar  matters;  and  to  take  all  those  steps 
which  are  usual  and  necessary  to  enable  *  him  duly  to 
execute  his  instructions  (?').  It  may  therefore  well 
happen  that  an  agent  who  has  no  positive  instructions, 
■  may  nevertheless  act  within  the  limits  of  his  real  au- 
thority; and  so  long  as  he  keeps  within  those  limits  he 
is  entitled  to  reimbursement  and  indemnity  (s).  The 
principle  applicable  to  the  first  class  of  cases  applies 
here;  but  if  the  agent  claims  an  indemnity  against  loss 
sustained  by  the  commission  by  him  of  an  illegal  act, 
he  must  be  prepared  with  very  strong  evidence  to  show 
that  such  acts  fell  within  the  limits  of  his  authority  (t). 
In  a  case  of  doubt  no  authority  to  commit  an  unlawful 
act  can  be  inferred. 

The  greatest   difficulty    arises   when   an   agent  acts 

(q)  See  Read  v.  Anderson,  13  Q.  B.  D.  779  ;  Seymour?'.  Bridge, 
14  ib.  460  ;  Loring  v.  Davis,  32  Ch.  D.  625.  The  position  in  the 
text  is  supported  by  Pothier,  Mandat.  No.  121,  and  Story, 
Agency,  k  465,  &c,  and  by  Balsh  r.  Hyham,  2  P.  W.  453 ;  Sut- 
ton v.  Tatham,  10  A.  &  E.  27  ;  and  the  cases  already  cited.  On 
the  other  hand,  see  2  Kent,  Com.  644.  In  Child  v.  Morley,  8  T. 
R.  610.  and  Warwick  v.  Slade,  3  Camp.  127,  the  agent  was  only 
bound  in  honour. 

(r)  Story  on  Agency,  ch.  6. 

Is)  Curtis  v.  Barclay,  5  B.  &  C.  141  ;  Sutton  r.  Tatham.  10  A. 
&  E.  27  ;  see.  too,  1  Wms.  Saund.  264  b  ;  Pettman  v.  Keble,  15 
Jur.  38;  Wolfe  v.  Horncastle,  1  Bos.  &  P.  323,  per  Buller,  J. 
This  was  also  the  principle  applied  in  R.  v.  Essex,  4  T.  R.  591, 
and  referred  to  by  Lord  Cottenham  in  A.-G.  v.  The  Mayor  of 
Norwich,  2  M.  &  Cr.  424. 

(0  See,  as  to  unreasonable  or  illegal  customs  not  known  to  the 
principal,  Perry  v.  Barnett,  15  Q.  B.  D.  388. 


CONTRIBUTION  AND  INDEMNITY.  447 

without  any  authority,  express  or   tacit,  but  bond  fide  Bk.  III. 
for  the  benefit  of  his  principal.      There  is  a  leaning  in  cliaP-  6.  Sect. 

many  minds  in  favour  of  the  agent  in  such  cases,  and _ 

it  cannot  be  denied  that  circumstances  may  occur  which  person  who 
render  officious  conduct   justifiable,  and  even  benevo-  ""asked 
lent.     On  the  other  hand,  culpa  est  immiscere  se,  rei  ad  acts  fur 
se  non pertinenti  (u) ;  and  by  the  law  of  England  a  per- 
son  who  chooses,  unasked,  to  incur  expense  for  another, 
must,  speaking  generally,  trust  rather  to  gratitude  than 
to  judicial   aid   for  reimbursement  (x).     The  only  es- 
tablished exceptions  to  this  rule  seem  to  be — 1,  where 
one  person  alone  sustains  a  loss  or  incurs  expense  for 
the  relief  of  himself  and  others  from  some  risk  or  obli- 
gation common  to  all;  and,  2,  where  one  person  does 
for  another  that  which  the  latter  is  legally  bound  to 
do,  but  either  cannot  or  will  not  do  himself.     The  first 
class  of  exceptions  has  been  already  alluded   to.     The 
second  may  be  illustrated  by  those  cases  in  which  ex- 
ecutors and  husbands  are  held  liable  for  the  expenses 
of  funerals,  although  they  gave  *  no  orders  for  them,  [*373] 
and  took  no  part  in  them  (y);  and  by  cases  in  which 
one  man's  goods  have  been  lawfully  seized  for  another 
man's  debt  (z). 

The  general  rule,  certainly,  is  that  the  officious  con-  General  rule, 
duct  of  one  person  imposes  no  obligation  on  another  to 
compensate  him  for,  or  indemnify  him   from,  the  con- 
sequences of  his  own  spontaneous  act;   and  even  al- 
though the  other  may  be  benefited,  he  cannot  on  that 
ground  alone  be  compelled  to  pay   for  what  he  never 
sought  to  obtain  (a).      A  very  strong  illustration  of 
this  is  afforded  by  the  case  of  Edmiston  v.  Wright  (b).  Edmiston  v. 
There  the  defendant  was  the  owner  of  some  estates  in  Wright- 
Georgia,  and  of  some  negroes  in  Jamaica.     The  plain- 
tiff's partner  was  the  defendant's  agent,  and  the  gen- 
eral manager  of  his  West  Indian  estates.     The  negroes 
in  Jamaica  were  shipped  for  Georgia,  and  seized  by 
Custom-house  officers  in  consequence  of  the  captain  of 
the  ship  having  neglected  to  procure  some  necessary 


(u)  Dig.  L.  tit.  17,  De  Reg.  Jur.  L.  36. 

(x)  See  Falcke  v.  Scottish  Imp.  Ins.  Co.,  34  Ch.  D.  248  ;  Re 
Leslie,  23  Ch.  D  552.  See  as  to  the  negotiorum  gestor  of  the  Ro- 
man law,  Dig.  III.  tit.  5,  DeNegot.  Gest,  Thibaut's  System  des 
Pand.  Recht,  \  558,  ed.  9. 

(?/)  See  Amhrose  v.  Kerrison,  10  C.  B.  776;  Rogers  v.  Price,  3 
Y.  &  J.  28  ;  Jenkins  v.  Tucker,  1  H.  Bl.  91. 

(z)  Edmunds  v.  Wallingford,  14  Q.  K.  D.  811. 

(a)  1  Wins.  Saund.  264  a;  6  B.  &  C.  444,  per  Bayley,  J.- 
Stokes v.  Lewis,  1  T.  R.  20;  Child  v.  Morley,  8  T.  R.  610. 

{b)  1  Camp.  88. 


448  CONTRIBUTION  AND  INDEMNITY. 


Bk.  III.  documents.     The  plaintiff,  for  the  purpose  of  redeern- 

Chap.  6.  Sect.  ^   „  ^e  negroe8  fr0m  the  authorities  who  had  seized 

J .  them,  paid  the  sum  of   1200/.,  and  the  negroes  were 

then   allowed  to  proceed  to  the  defendant's  estate  in 

Georgia.     The  plaintiff  sued  the  defendant  for  the  sum 

of  1200Z.  as  money  paid  to  his  use,  but  Lord  Ellenbor- 

ough  held  that  it  was  a  voluntary  payment  made  by 

the  plaintiff,  and  one  which  he  could  not  recover  from 

the  defendant. 

Rio-ht  of  The  right  of  a  trustee  to  indemnity  from  his   cestui 

trustees  to      que  trust  very  closely  resembles  the  right  of  an  agent 

indemnity.      ^0  indemnity  from  his  principal — 

1.  A  trustee  is  clearly  entitled  to  be  indemnified  out 
of  the  trust  property  against  all  costs,  charges,  and  ex- 
penses properly  incurred,  and  against  all  losses  sus- 
tained by  him,  in  the  execution  of  his  trust  (c) ;  and  if 
the  trust  property  is  not  sufficient  for  the  purpose  of 

[  *  374]  indemnifying  him  in  respect  of  such  matter.-,  *his  ces- 
tui que  trust,  if  under  no  disability,  is  personally  lia- 
ble to  indemnify  him  (d),  unless  such  liability  is  ex- 
cluded by  some  special  circumstance  (e). 

2.  On  the  other  hand,  a  trustee  who  commits  a 
breach  of  trust  is  entitled  to  no  indemnity  in  respect 
thereof,  except  from  those  cestuis  que  trustent,  if  any, 
at  whose  request  he  wrongfully  acted,  or  who  have 
sanctioned  and  benefited  by  his  improper  conduct  (/). 

•  3.  Every  act  of  a  trustee  respecting  the  trust  prop- 
erty must  necessarily  either  be  warranted  by  the  trust 
reposed  in  him,  or  amount  to  a  breach  of  trust,  and 
must  therefore  be  governed  by  one  or  other  of  the  two 
foregoing  principles.  But  as  with  agents,  so  with 
trustees;  their  acts  may  be  proper,  although  not  ex- 
pressly authorised;  and  whatever  is  necessary  in  order 
duly  to  execute  an  express  trust,  is  warranted  by  that 
trust,  and  entitles  the  trustee  to  indemnity  accordingly. 
But  even  this  principle  will  not  entitle  a  trustee  to  in- 

(c)  Re  Bleckley,  35  Beav.  449,  where  this  rule  was  applied  in 
favour  of  a  trustee  for  a  company  against  its  debenture-holders. 
See,  as  to  losses  which  may  never  arise.  Hughes-Hallett  v.  In- 
dian Mammoth  Gold  Mines  Co.,  22  Ch.  D.  561;  Hohbs  v.  Wayet, 
36  Ch.  D.  256;  and  as  to  the  right  of  indemnity  where  trustees 
hold  two  funds  for  different  sets  of  people,  hut  under  the  same 
instrument,  Fraser  r.  Murdoch,  6  App.  Ca,  855. 

(d)  See  Oriental  and  Commercial  Bank,  3Ch.  791;  Balsh  v. 
Hyham,  2  P.  W.  453;  Phene  v.  Gillan,  5  Ha.  1;  and  Ex  parte 
Chippendale,  4  De  G.  M.  &  G.  52. 

(e)  If  there  is  an  express  covenant  to  indemnify,  the  obliga- 
tion will  be  limited  by  the  covenant.  See  Selwyn  v.  Harrison, 
2  J.  &  H.  334;  Gillan  v.  Morrison.  1  De  G.  &  Sm.  421. 

(/)  See  Lewin  on  Trusts,  pp.  642  and  910,  ed.  8. 


CONTRIBUTION  AXD  INDEMNITY.  449 

demnity  in  respect  of  everything  lie  may  do  bond  fide  Bk.  III. 
for  the  benefit  of  his  cestui  que  trust;  regard  must  be  Chap.  6.  Sect. 
had  to  the  nature  of  the  trusts  to  be  executed.  J 

Of  some  differences  between  contribution  at  laic  and  in 
equity. 

Before  the  passing  of  the  Judicature  acts,  a  right  to  1.  As  to  in- 
contribution  or  indemnity,  arising  otherwise  than  by  demnity  he- 
special  agreement,  was  only  enforceable  at  law  by  a  ]0re  °'SS,t  '^S 
person  who  could  prove  that  he  had  already  sustained  ed. 
a  loss  (g).     But  in  equity  it  was  very  reasonably  held, 
that  even  in  the  absence  of  any  *  special  agreement,  a  [  *  375] 
person  who  was  entitled  to  contribution  or  indemnity 
from  another  could  enforce  his  right  before  he  had  sus- 
tained actual  loss  (h)  provided  loss  was  imminent  (i); 
and  this  principle  will  now  prevail  in  all  divisions  of 
the  High  Court  (k).     Therefore  a  person  who  is  enti- 
tled to  be  thus  indemnified  against  loss  is  not  obliged  to 
wait  until  he  has  suffered,  and  perhaps  been  ruined,  be- 
fore having  recourse  to  judicial  aid.  Thus,  in  the  ordi- 
nary case  of  principal  and  surety,  as  soon  as  the  creditor 
has  acquired  a  right  to  immediate  payment  from  the  sur- 
■ety,the  latter  is  entitled  to  call  upon  the  principal  debtor 
to  pay  the  amount  of  the  debt  guaranteed,  so  as  to  re- 
lieve the  surety  from  his  obligation  (Z);  and  where  one 
person  has  covenanted  to  indemnify  another,  an  action 
for  specific  performance  may   be  sustained  before  the 
plaintiff  has  actually  been  damnified  (m)  ;  and  the  limit 
of  the  defendant's  liability   to  the  plaintiff  is  the  full 
amount  for  which  he  is  liable;   or  if  he  is  dead  or  in- 
solvent the  full  amount  provable  against  his  estate,  and 

(g)  See  Maxwell  v.  Jameson,  2  B.  &  A.  51.  Compare  Spark 
v.  Heslop,  1  E.  &  E.  563,  and  the  judgment  of  Crompton,  J.,  in 
Randall  v.  Raper,  E.  B.  &  E.  84. 

(h)  See  Hobos  r.  Wayet,  36  Ch.  D.  256;  Laeey  v.  Hill,  18  Eq. 
182. 

(i)  ib. :  Hughes-Hallet  v.  Indian  Mammoth  Gold  Mines  Co., 
22  Ch.  D.  561. 

(k)  See  Jud.  Act,  1873,  \\  24  and  25. 

(I)  Wooldridge  v.  Norris,  6  Eq.  410:  Nesbit  v.  Smith,  2  Bro. 
C.  C.  582.  As  to  the  right  of  one  surety  to  contribution  from 
another,  see  Ex  parte  Snowdon,  17  Ch.  D   44. 

(m)  See  Ranelagh  v.  Haves,  1  Vera.  190.  See  Lloyd  /■.  Dim- 
mack,  7  Ch.  1).  398,  where  Ranelagh  v.  Hayes  was  disapproved, 
and  the  Court  declined  to  decree  specific  performance  of  a  cove- 
nant to  indemnify  with  liberty  to  apply  in  the  event  of  future 
breaches  which  might  or  mighl  not  occur.  Lloyd  v.  Dimmack, 
is,  however,  not  opposed  to  the  statements  in  the  texl  nor  to  the 
eases  cited  in  p.  375,  notes  (ft),  (/)  and  (/).  See  the  last  direc- 
tion in  the  order  7  Ch.  D.  402. 

*  6   LAW   OF   PABTNEKSHIP. 


450 


CONTRIBUTION  AND  INDEMNITY. 


Bk.  III. 

Chap.  6.  Sect. 
1. 


[  *  376] 

2.  As  to  the 
amount  pay- 
able by  each 
contributory. 
Rule  at  law. 


Rule  in 
equity. 


not  only  the  amount  of  dividend  which  such  estate  can 
pay  (n).  In  strict  conformity  with  these  principles, 
partners  and  directors  who  are  individually  liable  to  be 
sued  on  bonds  and  notes,  which  as  between  them  and 
their  co-partners  are  to  be  regarded  as  the  bonds  and 
notes  of  the  firm  or  company,  are  entitled  to  call  for 
contribution  before  these  bonds  or  notes  have  been  ac- 
tually paid  (o).  So  a  trustee  of  shares  liable  to  calls 
is  entitled  to  be  indemnified  by  his  cestui  que  trust 
against  them  before  they  are  paid  (p). 

*  Another  difference  between  law  and  equity  which 
formerly  prevailed,  and  to  which  it  is  necessary  to  ad- 
vert, affects  the  mode  in  which  the  amount  to  be  paid 
by  each  of  several  contributories  was  ascertained. 

At  law,  before  the  Judicature  acts,  if  several  persons 
had  to  contribute  a  certain  sum,  the  share  which  each 
had  to  pay,  was  the  total  amount  divided  by  the  num- 
ber of  contributors  ;  and  no  allowance  was  made  in  the 
event  of  the  inability  of  some  of  them  to  pay  their 
shares  (q).  But  in  equity,  in  the  absence  of  agree- 
ment to  the  contrary  (r),  those  who  could  pay  were 
compellable  not  only  to  contribute  their  own  shares,  as- 
certained as  above,  but  also  to  to  make  good  the  shares 
of  those  who  were  unable  to  furnish  their  contribu- 
tions.1    This  rule  also  now  prevails  in  all  divisions  of 

(n)  Cruse  v.  Paine,  6  Eq.  641,  and  4  Ch.  441. 

(o)  See,  for  example,  The  Norwich  Yarn  Co. 's  case,  22  Beav. 
143;  the  money  borrowed  by  the  directors  in  that  case  was  se- 
cured by  their  own  notes,  but  these  notes  had  not  been  actually 
paid  when  the  call  on  the  shareholders  was  made.  This  does 
not  appear  very  clearly  from  the  report  referred  to,  but  the 
writer  has  been  informed  by  persons  conversant  with  the  case 
that  the  above  statement  is  correct. 

(p\  Oriental  Commercial  Bank,  3  Ch.  791:  Cruse  v..  Paine,  6 
Eq.  (ill,  and  4  Ch.  441.  See  also  Hobbs  v.  Wayet,  36  Ch.  D. 
256,  wheie  the  calls  were  not  yet  made. 

(q)  See  Co  well  v.  Edwards,  2  Bos.  &  P.  268  ;  Batard  w.Hawes, 
2  E.  &  B.  287. 

(r)  McKewan's  case,  6  Ch.  D.  447.  The  agreement,  if  any, 
determines  the  extent  of  the  right. 


•  l  If  of  A. 's  partners  D.  is  outside  the  jurisdiction  of  the  court, 
contribution  will  be  decreed  to  A.  toward  a  payment  made  by 
him  on  behalf  of  the  firm,  the  whole  amount  thereof  being  ap- 
portioned among  the  partners  within  the  jurisdiction  of  the  court. 
Whitman  v.  Porter,  107  Mass.  522  (1871).  If  A.  retire  from  his 
firm  and  his  partners  agree  to  indemnify  him  against  all  the 
linn's  liabilities  and  judgment  is  obtained  against  the  firm  after 
his  retirement  and  he  pays  the  judgment  (although  not  liable 
therefor  as  between  the  members  of  the  old  firm),  he  is  entitled 
as  against  their  separate  creditors  to  subrogation  to  the  rights  of 
the  judgment  creditor  against  the  continuing  partners.  Scott's 
Appeal,  88  Pa.  St.  173  (1878). 


CONTRIBUTION  AND  INDEMNITY.  451 

the  High  Cout  (s).     For  example,  if  A.,  B.,  C,  and  D.  Bk.  III. 
are  liable  to  a  debt,  A.  can   compel  B.  and  C.  to  con-  Chap.  6.  beet. 

tribute  one-third   each,  if  D.  can    contribute  nothing  ;  J 

and  this,  as  between  A.,   B.,  and  C,  is  evidently  only 
fair  and  just  (t). 

In  Wadeson  v.  Richardson  (u),  one  of  four  partners  Wadeson  v. 
assigned  property  to  trustees  upon  trust,  inter  alia,  to  Richardson, 
pay  his  proportion  or  share  of  all  such  debts  as  were  or 
should  be  owing  by  him  and  his  three  co-partners.  He 
and  they  afterwards  became  bankrupt  ;  and  it  was 
held  that  the  share  and  proportion  of  debts  which  the 
trustees  were  to  pay  was,  not  the  share  and  proportion 
which,  as  between  the  assignor  and  his  co-partners,  he 
ought  to  contribute  to  the  funds  of  the  firm,  but  the 
share  and  proportion  which,  as  between  him  and  the 
creditors  of  the  firm,  it  was  necessary  for  him  to  pay, 
in  order  that  they  might  receive  twenty  shillings  in  the 
pound.  The  creditors  were  therefore  held  entitled  to 
come  in  under  the  deed  for  so  much  as  they  were  not 
paid  out  of  the  partnership  funds,  and  as  they  could 
not  recover  from  the  estates  of  the  other  partners. 

So,  where  a  loss  has  been  incurred  under  circum-  Rule  applies 
stances  *  which  render  it  wholly  chargeable  to  the  ac-  [  *  3 <7j 
count  of  the  partner  who  caused  it,  yet,  so  far  as  he  is  where  or.e 
unable  to  make  it  good,  it  must  be  borne  rateably  by  oUgh^eto  in_ 
the  other  partners  (x).     Upon  the  same  principle,  when  demnify  the 
a  company  is  being  wound  up.  the  solvent  shareholders  rest; 
must,  if  their  liability  to  creditors  is   not  limited,  con-  and  to  the 
tribute  whatever  may  be  necessary  to  pay  all  the  credit-  ^f^mpanies. 
ors  in  full  ;  and  must  make  up  rateably  amongst  them- 
selves what  ought  to  have  been  contributed  by  those 
shareholders    who   are  insolvent  (y)\    and  this  holds 
even  where  the  creditors  are  themselves  shareholders, 
and  where  the  liability  of  the  shareholders  is  as  between 
themselves  proportionate  to  their  shares  (z). 

Of  contribution  between  wrong- doers. 

There  is  a  saying  that  there  is  no  contribution  amongst  of  contribu- 
wrong-doers  (a)  ;  but  this  doctrine   is   certainly  inap-  tion  amongst 

(s)  .Tnd.  Act,  1873,  \\  24  and  25. 

(/)  Bering  v.  Winchelsea,  1  Cox,  318  ;  Hole  v.  Harrison,  1  Ch. 
Ca.  246;  Peter  v.  Rich,  Rep.  in  Ch.  19. 

(u)  1  V.  &  B.  103. 

(a-)  See  Oldaker  ».  Lavender,  6  Sim.  239  ;  Cruikshank  v.  Mc- 
Vicar,  8  Beav.  117,  118. 

(y)  Robinson's  Ex.  case,  6  De  G.  M.  &  G.  572. 

(z)  Professional  Life  Ass.  Co.,  3  Eq.  668,  and  3  Ch.  167. 

(a)  Merry  weal  her  v.  Nixan,  8  T.  R.  186;  and  2  Sm.  L.  C;  Col- 
burn  v.  Patmore,  1  Cr.  M.  &  R.  73;  A.-G.  v.  Wilson,  Cr.  &  Ph.  1. 


wrongdoer 


452  CONTRIBUTION  AND  INDEMNITY. 

Bk.  III.  plicable  to  partners  in  the  general  form  in  which  it  is 

Chap.  6.  Sect.  enuncja{ed  It  is  true,  that  if  a  partnership  is  itself 
J illegal,  no  member  of  it  can,  in  respect  of  any  trans- 
action tainted  with  the  illegality  which  infects  the  firm, 
obtain  relief  against  any  other  member  ;  but  there  is 
no  authority  for  saying  that  if  one  of  the  members  of 
a  firm  sustains  a  loss  owing  to  some  illegal  act  not  at- 
tributable to  him,  but  nevertheless  imputable  to  the 
firm,  such  loss  must  be  borne  entirely  by  him,  and  that 
he  is  not  entitled  to  contribution  in  respect  thereof 
from  the  other  partners  (b). 
Application  The  claim  of  a  partner  to  contribution  from  his  co- 
ot doctrine  to  partners  in  respect  of  a  partnership  transaction  can- 
partners.  nof.  jjg  defeats  on  the  ground  of  illegality,  unless  the 
partnership  is  itself  an  illegal  partnership  (c);  or  un- 
[  *  378]  less  the  act  relied  on  as  the  basis  of  the  *  claim  is  not 
only  illegal,  but  has  been  committed  by  the  partner 
seeking  contribution,  when  he  knew  or  ought  to  have 
known  of  its  illegality  (d).1  In  any  of  these  cases  he 
can  obtain  no  assistance  against  his  co-partners,  and 
must  abide  the  consequences  of  his  own  wilful  breach 
of  the  law.  Upon  this  ground  it  was  often  held  (before 
it  became  lawful  for  partners  to  carry  on  the  business 
of  marine  insurance)  that  if  one  of  a  firm  of  marine 
insurers  paid  money  in  respect  of  a  loss  insured  against 
by  the  firm,  he  could  not  recover  any  part  of  the  pay- 
ment from  his  co-partners  (e). 

But  if  the  partnership  is  not  itself  illegal,  and  if  the 
partner  claiming  contribution  has  not  himself  been 
personally  guilty  of  a  breach  of  the  law,  his  claim  will 
prevail,  although  the  loss  in  respect  of  which  it  is 
made  may  have  arisen  from  an  unlawful  act.  This 
Campbell?;,  appears  from  Campbell  v.  Campbell  (/),  whei'e  a  firm 
amp  e  of  distillers  had  incurred  a  penalty  in  consequence  of 

a  purchase  of  illicit  whiskey.      The  purchase  was  made 

(b)  See,  at  law,  Betts  v.  Gibbins,  2  A.  &  E.  57;  A  damson  v. 
Jarvis,  4  Bing.  G6,  and  see  in  equity,  Ramskill  v.  Edwards,  31 
Ch.  D.  100;  Lingard  v  Bromley,  1*  V.  &  B.  114;  Baynard  v. 
Woodley,  20  Beav.  583;  Ashurst  v.  Mason,  20  Eq.  225. 

(c)  As  to  which,  see  ante,  p  91. 

(d)  See  Thomas  v.  Atherton,  10  Ch.  D.  185;  Adamson  v. 
Jarvis,  4  Bing.  66  ;  Betts  v.  Gibbins,  2  A.  &  E.  57. 

(e)  Aubert  v.  Maze,  2  Bos.  &  P.  371. 

(/)  7  CI.  &  Fin.  166.  See,  too,  Thomas  v.  Atherton,  10  Ch. 
D.  185;  Woolley  v.  Batte,  2  Car.  &  P.  417  ;  Pearson  v.  Skelton, 
1M.&W,  504. 


1  It  has  has  been  held  that  a  partner  in  a  firm  of  gamblers  who 
has  paid  the  firm's  debt  and  taken  his  associate's  note  for  his 
share  of  the  losses  can  enforce  its  payment.  Boggess  v.  Lilly, 
18  Tex.  200  (1856). 


CONTRIBUTION  AND  INDEMNITY.  453 

by  the  ..janaging  partners  ;  and  one  of  the  members  of  Bk.  III. 
the  firm,  who  took  no  part  in  its  business ;  was  entirely  Chap.  6.  Sect. 

ignorant  and  innocent  of  what  had  been  going  on.    The  J 

firm  was  convicted  for  the  full  amount  of  the  penalties 
claimed  ;  but  the  Crown,  on  being  memoralised  by  the 
innocent  partner  and  the  principal  of  the  acting  part- 
ners, remitted  the  penalties  except  to  the  amount  of 
3,000/.  This  sum  was  levied  partly  on  the  property  of 
the  firm  and  partly  on  that  of  the  innocent  partner 
only.  He  then  claimed  to  have  the  whole  of  what  he 
had  been  compelled  to  pay  made  good  to  him  by  his 
co-partners,  on  the  ground  that  they  alone  had  been 
guilty  of  the  illegal  purchases.  The  innocent  partner 
obtained  a  verdict  for  the  whole  amount  claimed,  with 
interest ;  and  his  co-partners  were  adjudged  liable, 
jointly  and  severally,  to  indemnify  him.  A  motion  for 
a  new  trial  was  refused.  An  appeal  to  the  Lords  was 
dismissed  with  costs,  for  technical  reasons,  to  which  it 
is  not  necessary  to  allude ;  but  the  Lord  Chancellor, 
in  giving  the  judgment  of  *  the  House,  expressed  a  strong  [  *  379] 
opinion  that  the  defence  of  illegality  which  was  set  up 
could  not  be  supported.  His  Lordship  said,  "If  this 
objection  could  prevail,  that  because  these  parties  were 
all  guilty  of  a  common  offence,  therefore  out  of  such  a 
transaction  no  contribution  could  arise,  it  would  be  an 
answer  to  him  (i.  e.,  the  innocent  partner)  if  he  had 
paid  the  whole,  and  demanded  contribution  only  against 
the  other  parties." 

Again,  where  a  company  had    illegally    commenced  Ex  parte 
business   before    the    amount  of   capital    required  by  Longworth's 
statute  to  be  paid  up   has  been   paid   up,  it  was   held  executors- 
that  the  shareholders  were  nevertheless  liable  amongst 
themselves  to  contribute  to  the  discharge  of  the  debts 
of  the  company  (g). 

The  case  which  presents  most  difficulty  is  one  in  Where  all 
which  an  unlawful  act  has  been  knowingly  performed  jir?.™  pan 
by  all  the  partners,  so  that  all  are  in  pari  delicto. 
There  is  a  dictum  of  Lord  Cottenham  to  the  effect 
that  in  such  a  case  each  partner  must  bear  all  the  loss 
he  may  happen  to  sustain,  and  that  he  cannot  require 
his  co-partners  to  share  that  loss  (h) ;  but,  on  the  other 
hand,  there  is  a  decision  which  goes  far  to  show  that 
the  loss  ought  to  be  apportioned  between  all  the  part- 

(g)  Ex  parte  Longworth's  Executors,  Johns.   465,  and  on  ap- 
peal, 1  De  G.  F.  &  J.  17. 

(A)  See  A.-G.  v.  Wilson,  Cr.  &  Ph.  1. 


454  COMPENSATION  FOR  TROUBLE. 

Bk.  III.  ners,  unless  the  illegal  act  in  question  is  a  pure  tort(t'), 

Chap.  6.  Sect.  or  a  direct  violation   of  some  statute,  or  unless    the 

— contract  of  partnership  is  itself  void  on  the  ground  of 

illegality.  It  is  apprehended  that  if  all  the  members 
of  a  firm  were  equally  guilty  of  a  breach  of  trust,  and 
one  of  the  firm  alone  had  made  it  good  out  of  his  own 
moneys,  he  would  be  allowed,  in  taking  the  partnership 
accounts,  to  charge  his  co-partners,  rateably  with  him- 
self, with  the  amount  paid  by  him  (k). 


services. 


[  *380]  *  Section  II. — Of  Compensation  for  Trouble. 

Partner  not  Under  ordinary  circumstances  the  contract  of  part- 
entitled  to  nership  excludes  any  implied  contract  for  payment  for 
charge  firm  services  rendered  for  the  firm  by  any  of  its  members  ( I). 
Consequently,  under  ordinary  circumstances,  and  in 
the  absence  of  an  agreement  to  that  effect,  one  partner 
cannot  charge  his  co-partners  with  any  sum  for  com- 
pensation, whether  in  the  shape  of  salary,  commission, 
or  otherwise,  on  account  of  his  own  trouble  in  con- 
ducting the  partnership  business  (m);1  and  in  this  re- 
spect a  managing  partner  is  in  no  different  position 
from  any  other  partner  (n).2  Upon  the  same  princi- 
ple it  has  been  held,  that  in  taking  the  accounts  of 
three  partnerships,  viz.,  of  the  firm  A.  and  B.,  of  its 
successors,  A.,  B.,  and  C,  and  of  its  successors  B.  and 
C,  this  last  firm  could  not  charge  a  commission  for  col- 
lecting the  debts  due  to  the  two  preceding  firms  (o). 
So,  a  partner  employed  to   buy   or  sell  goods  for  the 

(i)  See  Baynard  v.  Wooley,  20  Beav.  583.  But  see  as  to  tres- 
passes by  mining,  Thomas  v.  Atherton,  10  Ch.  D.  185. 

(k)  See  Ashurst  v.  Mason,  20  Eq.  225.  See,  further,  as  to  con- 
tribution between  wrongdoers,  Pollock.  Law  oi  Torts,  170. 

(I)  Thompson  v.  Williamson,  7  Bli.  N.  S.  432,  per  Lord  Wyn- 
ford  ;  Holmes  v.  Higgius,  IB.  &  C.  74. 

(m)  As  to  a  charge  of  commission  by  a  ship's  husband,  see 
Miller  v.  Mackay,  31  Beav.  77,  and  34  Beav.  295  ;  as  to  the  man- 
aging owner  of  a  ship,  see  The  Meredith,  10  P.  D.  69. 

(n)  Hutcheson  v.  Smith,  5  Ir.  Eq.  117.  There  a  managing 
partner  was  disallowed  all  salary,  commission,  and  compensa- 
tion for  treating  customers. 

(o)  Whittle  v.  McFarlane,  1  Knapp,  311. 

1  Brown's  Appeal.  80  Pa.  St,  139  (1879);  Marsh's  Appeal.  (59 
Pa.  St.  30  (1871);  Coddington  v.  Well,  29  N.  J.  Eq.  50  1  (ls?si; 
Loomisr.  Armstrong,  49  Mich.  521  (1883);  Scudder  v.  Anus 
89  Mo.  496  (,1886);  Berry  v.  Folkes,  60  Miss.  576  (1882  :  Cam- 
eron v.  Francisco,  26  Qh.  St.  190  (1875);  Frazier  v.  Frazier,  77 
Ya.  775  (1883);  Duff  v.  Maguire,  107  Mass.  87  (1871). 

2  Handle  r.  Richardson,  53  Miss.  176   (1876);  Pierce  v.  Scott 
37  Ark.  308  (1881). 


COMPENSATION  FOR  TROUBLE.  455 

firm,  cannot   charge    it  with   anv  commission   for    so  Bk.  III. 
i    •  ■     \  *  Chap.  6.  Sect, 

doing  (jj).  2. 

Even  where  the  amount  of  services  rendered  by  the  J 

partners  is    exceedingly    unequal,  still,  if  there  is  no  Rule  applies 
agreement  that  their  services  shall  be  remunerated,  no  JJjJJJJ^JjL-, 
charge  in  respect  of  them  can  be  allowed  in  taking  the  have  work'e(i 
partnership  accounts.      In  such   a   case   the  remunera-  unequally. 
tion  to  be  paid  to  either  for  personal  labour  exceeding 
that  contributed  by  the  other,  is  considered  as  left  to 
the  honour  of  the  other  ;   and  where   that  principle  is 
wanting,  a  court  of  justice  cannot  supply  it  (q).1 

*  But  where,  as  is  usually  the   case,  it  is  the  duty  of  [  *  381] 
each  partner  to  attend  to  the  partnership  business,  and  Wilful  in- 
one  partner  in   breach  of  his  duty   wilfully   leaves   the  jJJj^J)  to 
others  to  carry  on   the   partnership   business  unaided, 
they  are,  it  would  seem,  entitled  to  compensation  for 
their  services.     In  Airey  v.  Borham  (r),"  two   partners  Airey  v. 
had  agreed  to  devote  their  whole   time  to  the  partner-  Borham. 
ship  business  ;  they  quarrelled,  and  one  of  them  only 
afterwards   attended  to  it  :   the  partnership   was   ulti- 
mately dissolved,  and  an  inquiry  was   directed  for   the 
purpose   of  ascertaining    what   allowance  ought  to  be 
made  to  him  for  having  carried  on  the  business  alone. 

The  rule,  moreover,  which  precludes  a  partner  from  Rule  as  to 
charging  his  co-partners  with  payment  for  his  services,  services 
does  not  apply  to  services  rendered  in  carrying  on   the  rj"^]e^e^is_ 
business  of  the  firm  after   its  dissolution  ;  and  it   has  ^olutiou. 
been  held  that  a  surviving  partner  who  carries  on  the 
business  of  the  firm  for  the  benefit  thereof  is  entitled 
to  remuneration  for  his  trouble  in  so  doing  (s)  ;  unless 

(p)  See  Bentley  v.  Craven,  18  Bear.  75. 

(q)  See  per  Wi'gram,  V.-C,  in  Webster  v.  Bray,  7  Ha.  179.  In 
that  case  an  allowance  for  trouble  was  made  to  the  defendant, 
but  it  was  offered  by  the  plaintiff.  In  Robinson  v.  Anderson,  20 
Beav.  93,  which  was  a  similar  case,  no  allowance  was  oflered, 
nor  was  anv  given  by  the  Court. 

(r)  Airey  v.  Borham,  29  Beav.  620. 

(.s)  Featherstonhaugh  v.  Turner,  25  Beav.  382  ;  Brown  v.  De 
Tastet,  Jac.  284  ;  Crawshay  r.  Collins.  2  Russ.  347.  See,  also, 
Mellersh  v.  Keen.  27  Beav.  242.  where  one  partner  became  a 
lunatic,  and  the  business  was  continued  by  the  others. 


1  In  Stratton  v.  Tabb,  8  111.  App.  225  (1881).  A.  transacted  all 
the  business  of  the  firm  ;  his  two  associates  attended  totheirown 

outside  occupations:  but  no  compensation  was  allowed  him. 
Nor  was  compensation  allowed  a  partner  who  for  twenty  years 
had  carefully  looked  after  the  business  of  his  firm,  while  his 
partner -rave  but  little  attention  to  it.  Forrer  v.  Forrer,  29Gratt 
134  I  L877). 

-See  also  the  following  similar  eases.     Newell  v.  Humphrey, 
37  Vt.  265  11864    ;  Gyger's  Appeal,  62  Pa.  St.  7:;  (1869). 


•±56  CONTRIBUTION  AND  INDEMNITY. 


Bk.  III.  there  is  some  special  reasc  n  to  the  contrary,  as   where 

Chap.  6.  beet.  j^   jg  ^e  eSecutor  of  bis  deceased  partner  (t).1 

l! In  India  an  executor  is  allowed  a  per-centage  on   the 

Indian  assets  collected  by  him  ;  and  a  surviving  partner  who  is 

allowances.  the  executor  of  his  deceased  co- partner,  has  been 
allowed  tbis  per-centage  even  on  tbe  amount  due  from 
the  partnership  to  the  estate  of  the  deceased  (u). 


Section  III. — Of  Outlays  and  Advances. 

Outlays  and  In  taking  a  partnership  account,  each  partner  is  en- 
advances  titled  to  be  allowed  against  the  other  everything  he  has 
made  by  one  advanced  or  brought  in  as  a  partnership  transaction, 
and  to  charge  the  other  in  the  account  with  what  that 
[  *  382]  other  has  not  brought  in,  *  or  has  taken  out  more  than 
he  ought  ;  and  nothing  is  to  be  considered  as  his  share 
but  his  proportion  of  the  residue  on  the  balance  of  the 
account  (x).  Although,  therefore,  a  partner  is  not  en- 
titled to  compensation  for  trouble,  he  is  entitled  to 
charge  the  partnership  with  sums  bond  fide  expended 
by  him  in  conducting  the  business  thereof  (y).~  Thus, 
where  the  managing  director  of  a  cost-book  mining 
company  advanced  money  for  the  purpose  of  enabling 
the  business  of  the  company  to  be  carried  on,  he  was 
held  entitled  to  be  reimbursed  by  the  company,  there 
being  no  question  as  to  his  authority  to  carry  on  the 
business  on  credit  (z).  So,  where  the  directors  of  a 
mining  company  advanced  money  to  keep  the  mine   at 

(t)  Burden  v.  Burden,  1  V.  &  B.  172  ;  Stoeken  v.  Dawson,  6 
Beav.  371. 

(u)  Cockerell  v.  Barber,  2  Russ.  585,  and  1  Sim.  23. 

(x)  Per  Lord  Hardwicke  in  West  v.  Skip.  1  Yes.  S.  242. 

(y)  Burden  v.  Burden.  1  V.  &  B.  172,  where  a  surviving  part- 
ner, who  was  also  executor,  was  allowed  to  charge  expenses  actu- 
ally incurred,  but  not  time  and  trouble.  Compare  Hutcheson  v. 
Smith,  5  Ir.  Eq.  117,  ante,  p.  380,  note  (»). 

(z)  Ex  parte  Sedgwick,  2  Jur.  N.  S.  949. 

1  Where  the  business  of  the  firm  is  simply  wound  up,  and  not 
continued  for  the  benefit  of  all,  no  compensation  is  allowed  the 
partner  who  attends  to  its  settlement.  Dunlap  v.  Watson.  1:24 
Mass.  305  1878);  Bennett  v.  Russell,  34  Mo.  524  (.1864); 
Brown's  Appeal,  89  Pa.  St.  139  (1879). 

zCoddington  v.  Idell.  29  X.  J.  Eq.  504  (1878)  :  King  v.  Hamil- 
ton. 16  111.  190  (181)  ;  Stegman  v.  Berryhill,  72  Mo.  307  ( )  ; 

Newell  v.  Humphrey.  37  Vt.  265  (1865).  A  partner  can  make 
no  advance  or  commission  on  his  expenditures  for  the  firm's  ac- 
count ;  i.  e.,  he  cannot  hire  a  clerk  for  $2  per  day  and  charge  for 
his  services  at  $4  per  day,  although  really  worth  the  latter  sum. 
Porter  v.  Wheeler,  37  Vt.  281  (1865). 


OUTLAYS  AND  ADVANCES.  457 

work,  and  it  would  otherwise  have  been  drowned,  they  Bk.  III. 
were  held  entitled  to  be  reimbursed,  although  they  had  pnaP-6.  Sect. 

no  power  to  borrow  money  on  the  credit   of  the  com-  J 

pany  (a). 

So  a  partner   is  clearly   entitled  to  charge  the  firm  Payments  on 
with  whatever  he  may  have  been  compelled   to  pay   in  account  of 
respect  of  its  debts  (6)  ;  or  in  respect   of  obligations  rteDts- 
incurred  by  him   alone   at   the  request  of  the  firm,  as 
where  he  is  compelled  to  pay  a  bond  given  by   himself 
alone,  but  for  the  benefit  of  the  firm   and  as   a  trustee 
for  it  (c),  or  where  he  sacrifices  a  debt  due  to  himself  in 
order   to  enable  the  firm  to  obtain  a  debt  due  to  it  (cl). 

It  need  hardly  be   observed,  that  an  outlay  made   by  Useless  out- 
one  partner  with  the  approbation  of  his  co-partners  and  lays. 
for  the  benefit  of  the  firm,_must  be  made  good   by   the 
firm,  however,  *  ualessT,he~ outlay  may  have  been.    For  [  *  383] 
example,  if  a  firm  purchases  a  patent  which  is  paid  for 
by  one  member  individually,  he  is   entitled   to  charge 
the  purchase  money  to  the  firm,  however  worthless   the 
patent  may  ultimately  prove  to  be  (e).1     On    the    other 
hand,  if  a  partner  makes   an  improper  outlay   or  ad- 
vance on  behalf  of  the  firm,  he  cannot  charge  it  to  the 
firm,  unless  his  conduct  is  ratified  by  it  ;2  or  unless  the 
firm's  assets  have  been  increased  or  preserved   by  such 
outlay  or  advance.      The  last  qualification   is  rendered  Useful  but 
necessary  by  The  German  Mining  Company's  case  (/).  unauthorised 

An  outlay  which  may  have  been  very  proper  and  even  outlays- 

necessary  for  the  conduct  of  the   partnership   business, 

cannot  be  charged  to  the  partnership  account,  if  so  to 

do  would  be  inconsistent  with  the  agreement  into  which 

the  partners  have  entered.      In  Thornton  v.  Procter  (g),  Thornton  v. 
- Procter 

(a)  Ex  parte  Chippendale,  4  De  G.  M.  &  G.  19.  See  ante,  book 
ii.  ch.  1,  £  6.  This  case,  and  others  of  the  same  class,  will  be 
noticed  more  at  length  in  the  vol.  on  Companies. 

(b)  Prole  v.  Masterman,  21  Beav.  61  A  partner  who  negli- 
gently pays  a  debt  claimed,  but  not  due,  cannot  charge  the  pay- 
ment to  trie  linn.  Re  Webb,  2  B.  Moore,  500  ;  Mellreath  v.  Ma'r- 
getson.  4  Doug.  278;  noticed  in  the  next  section. 

(c)  Croxton's  case,  5  De  G.  &  S.  432  :  Sedgwick's  case,  2  Jur. 
N.  S.  949;  V.-C.  W. ;  Gleadow  v.  The  Hull  Glass  Co.,  13  Jur. 
1020,  V.-C.  E. 

(d)  Lefroy  v.  Gore,  1  Jo.  &  Lat.  571,  where  one  partner  re- 
leased a  witness  whose  evidence  was  essential  to  the  firm. 

(e)  Gleadow  v.  The  Hull  Glass  Co.,  13  Jur.  1020. 

(/)  4  De  G.  M.  &  G.  19.     See  ante,  book  ii.  ch.  1.  ?  6. 
(g)  1  Anstr.  94.     See,  too,  Hutcheson  v.  Smith,  5  Ir.  Eq.  117  ; 
East  India  Co.  v.  Blake,  Finch,  117. 


1  See  Onderdonck  v.  Hutchinson,  (>  X.  J.  Eq.  632  |  1849)  ;  Til- 
lotson  i).  Tillotson,  31  Conn.  335  (1867)  :  Godfrey  v.  White,  43 
Mich.  171  1 1880). 

Zimmerman  v.  Hubcr,  29  Ala.  379  (1856). 


2  v 


45S  CONTRIBUTION  AND  INDEMNITY. 

Bk.  III.  the  plaintiff  and  the  defendant  had  become  partners  as 

Chap.  6.  Sect.  w^ne  raerchants,  and  the  plaintiff,  who  for  some  time 

:^ had  principally  conducted  the  business,  had  expended 

considerable  sums  of  money  in  treating  customers,  and 
this  was  found  to  be  necessary  in  that  trade.  The  plain- 
tiff had  for  several  years  kept  the  accounts  of  the  part- 
nership, and  in  such  accounts  he  never  made  any  charge 
for  entertaining  customers,  or  demanded  any  allowance 
on  that  account.  He,  nevertheless,  afterwards  con- 
tended that  he  ought  to  be  allowed,  in  taking  the  ac- 
counts of  the  partnership,  to  debit  the  firm  with  50Z.  a 
year  for  entertainments,  and  this  was  proved  to  be  a 
reasonable  sum.  Bat  it  was  shown  to  be  usual,  in  cases 
of  this  sort,  to  insert  some  special  clause  in  the  articles 
if  an  allowance  was  intended  to  be  made,  and  the  arti- 
cles into  which  the  partners  had  entered  contained  noth- 
ing more  than  a  general  stipulation,  that  all  losses  and 
expenses  should  be  borne  equally.  It  was  accordingly 
held  that  the  plaintiff  was  not  entitled  to  any  allowance, 
for  he  could  only  claim  it  as  being  a  gross  article  of 
expenditure,  and  he  was  precluded  from  charging  it  in 
that  way  by  not  having  included  it  in  the  yearly  ac- 
counts. 
[  *  384]  *  A  partner  is  not  entitled  to  charge  the  hrrn  with 

No  allowance  any  moneys  alleged  by  him  to  have  been  laid  out  for  the 
for  expenses    benefit  of  "the  firm  if  he  declines  to  give  the  particulars 
to  hwetoea of  his   onlays;  he    cannot    charge    for    secret    service 
incurred.         money  (h),  nor  for  general  expenses   (i).      Nor  can  a 
partner  charge  the  firm  with  travelling  expenses  unless 
they  have  been  bona  fide  and  properly  incurred  by  him 
when  travelling  for  the  purpose  of  transacting  its  busi- 
ness (A;). 
Charges  for         Again,  a  partner  expending  money  for  valuations  to 
valuation.       carry  out  a  transaction  between  himself  and  co-partners, 
which  they  afterwards  succeed  in  setting  aside,  cannot 
charge  them  with  any  part  of  what  he  may  have  so  ex- 
pended (I). 

Not  only  may  one  partner  make  outlays  or  advances 
for  the  benefit  of  the  firm,  but  the  firm  may  make  ad- 
vances and  outlays  to  or  for  the  benefit  of  one  partner. 
Under  ordinary  circumstances  such  advances  and  out- 
lays will  be  equivalent  to  a  loan  by  the  firm  to  him,  and 
must  be  treated  accordingly  in  taking  the  partnership 

(A.)  See  the  York  and  North  Midland  Rail  Co.  v.  Hudson,  16 
Beav.  485. 

(t)  The  East  India  Co.  v.  Blake.  Finch.  117. 
(k)  Stainton  v.  The  Carron  Co.,  24  Beav.  356. 
(/)  Stocken  v.  Dawson,  6  Beav.  375. 


LIABILITIES  AND  LOSSES.  459 

accounts.     But  occasionally  considerable  difficulty  arises,  Bk.  III. 
e.g.,  where  there  has  been  an  outlay  by  the  firm    on  ^hap.  6.  Sect. 

property  belonging  exclusively  to  one  of  the  partners,  J 

but  used  by  the  firm  for  {partnership  purposes.      In  the  Outlays  on 
absence  of  all  evidence  of  any  agreement  upon  the  sub   seParate  pro- 
ject, justice  seems  to  require  that  in  taking  the  partner-  i^i-tiier 
ship  accounts  the   owner  of  the  property  in   question 
should  not  be  allowed  exclusively  to  gain  the  benefit  of 
the  outlay,  but  that  the  improved  value  of  his  property 
should  be  treated  as  a  partnership  asset,  and  be  shared 
between  him  and  his  co-partners  accordingly  {in). 

In  Burdon  v.  Barkus,  a  managing  partner  had,  with  Burdon  v. 
the  knowledge  of  his  co-partner,  expended  partnership  Barkus. 
monies  in  sinking  a  pit  for  partnership  purposes  on  land 
which  belonged  exclusively  to  the  latter  partner ;  the 
managing  partner  had  erroneously  supposed  that  the 
partnership  was  for  a  term  of  years;  but  the  partner-         qo-t 
ship  was   suddenly  and   unexpectedly  *  dissolved,  and  L     "°oj 
the  pit  thereby  became  the  sole  property  of  the  partner 
in  whose  land  it   had   been   sunk;  but   an  inquiry  was 
directed  whether  an  allowance  should  be  made  in  respect 
of  the  outlay  in  sinking  the  pit  (?t).     So  in  Paicsey  v.  Pawsey  v. 
Armstrong  (o)  an  inquiry  was  directed  as  to  buildings  *  rms  lon»- 
erected  by  a  firm  on  the  property  of  one  of  the  partners. 


Section  IV. — Of  Debts,  Liabilities,  and  Losses. 

In  the  absence  of   any  agreement  to  the  contrary,  Mutuality 
partners  are  liable  to  share  losses  in  the  same  propor-  0I  profit  and 
tion  as  they  are  entitled  to  share  profits  {p)-1     As  a  ^jPJe" 
general  rule,  therefore,  if  one  partner  has  been  com- 
pelled to  pay  more  than  his  share  of  a  partnership  debt,2 
or  if,  in  properly  conducting  the  affairs  of  the  firm,  he 
has  personally  incurred  a  liability,  he  is  entitled  to  be 
indemnified  by  his  co  partners  so  far  as  may  be  neces- 
sary to  place  all  on  a  footing  of  equality  {q). 

(m)  See  ante,  p.  330. 

(»)  Burdon  v.  Barkus.  3  Giff.  412,  aff.  on  appeal.  4  De  G.  F.  & 
J.  42. 

(o)  18  Ch.  D.  707.     Compare  the  converse  case,  Bank  of  Eng- 
land case,  3  De.  G.  F.  &  J.  <ii5.  ante,  p.  330. 

p)  See  Re  Albion  Life  Ass.  Soc,  16  Ch.  D.  83,  where  this  rule 
was  recognised,  but  was  held  not  to  apply  to  policy  holders  par- 
ticipating in  profits. 

('/)  Wright  v.  Hunter,  5  Ves.  792;  and  see  Robinson's  Execu- 

1  Whitcomb  v.  Converse,  119  Mass.  38  (1875);  Flagg  v.  Stowe, 
85  111.  164  (1877). 

2  Evans  v.  Clapp,  123  Mass.  165  (1877). 


460  CONTRIBUTION  AND  INDEMNITY. 

Bk.  III.  But  it  by  no  means  follows,  that  a  person  liable  to  be 

C  hap.  6.  Sect,  STle(j  as  if  }±e  were  a  partner,  is,  as  between  himself  and 

.* his  co-partners,  bound  to  share  the  losses  of  the  firm ;  for 

Presumption  his   co-partners  may  have  agreed  to  indemnify  him  al- 

rebutted  by  together  from  losses,  and  if  such  is  the  case,  they  can- 
evidence  .  * 

not  require  him  to  contribute  thereto  with  them   (r).1 

So,  where  the  promoters  of  a  company  agree  with  the 
shareholders  that  certain  preliminary  expenses  to  be  in- 
curred in  obtaining  surveys,  reports,  &c,  shall  not  ex- 
ceed a  certain  sum,  and  the  promoters  spend  more  than 
that  sum,  they  cannot  require  the  shareholders  to  make 
good  the  difference;  although  the  extra  expenditure 
may  have  been  caused  by  circumstances  which  were  un- 
foreseen, and  over  which  the  promoters  had  no  con- 
trol (s). 
[     3-S6J  *  rp^Q  generaj  principle,  however,  that  partners  must 

General  ob-  contribute  rateably  to  their  shares  towards  the  losses 
ligation  of  ancj  (Jebts  of  the  firm,  is  not  open  to  question.  Their 
contribute  to  obligation  to  contribute  is  not  necessarily  founded 
losses.  upon,  although  it  may  be  modified  and  even   excluded 

altogether  by,  agreement  (t).  For  example,  where 
there  is  no  agreement  to  the  contrary,  it  is  clear  that  if 
execution  for  a  partnership  debt  contracted  by  all  the 
partners,  or  by  some  of  them  when  acting  within  the 
limits  of  their  authority,  is  levied  on  any  one  partner, 
who  is  compelled  to  pay  the  whole  debt,  he  is  entitled 
to  contribution  from  his  co-partners  («).  So,  if  one 
partner  enters  into  a  contract  on  behalf  of  the  firm,  but 
in  such  a  manner  as  to  render  himself  alone  liable  to 
be  sued,  he  is  entitled  to  be  indemnified  by  the  firm, 
provided  he  has  not,  as  between  himself  and  his  co- 
partners, exceeded  his  authority  in  entering  into  the 
contract  (x);  and  if,  in  such  a  case,  he  with  their 
knowledge  and  consent  defend  an  action  brought  against 
him,  he  is  entitled  to  be  indemnified  by  the  firm  against 

tors'  case,  6  De  G.  M.  &  G.  57-2;  Lefroy  v.  Gore.  1  Jo.  &Lat.  571, 
and  Hamilton  v.  Smith,  7  W.  R.  173,  as  to  promoters  of  com- 
panies. 

(/)  See  Geddes  v.  Wallace,  2  Bli.  270. 

(s)  Gillan  v.  Morrison,  1  De  G.  &  S.  421;  Be  The  Worcester 
Corn  Ex.  Co.,  3  DeG.  M.  &  G.  180.  See,  too,  Mowatt  and  Elliott's 
case,  3  De  G.  M.  &  G.  254,  and  Carew's  case,  7  ib.  43. 

i0  Ante,  p.  368. 

(«)  McOwen  r.  Hunter,  1  Dr.  &  Walsh.  3-17;  Evans  p.  Yeatherd, 
2  Bing.  132;  Robinson's  Executors'  case,  6  De  G.  M.  &  G.  572. 
See,  too  Lefroy  v.  Gore,  1  Jo.  &  Lat.  571,  as  to  provisional  di- 
rect ins. 

i  ,)  (ileadow  v.  The  Hull  Glass  Co.,  13  Jur.  1020;  Sedgwick's 
case,  2  Jur.  N.  S.  949. 

1  See  Scott's  Appeal,  88  Pa.  St.  173  (1878). 


LIABILITIES  AND  LOSSES.  461 

the  damages,  costs,  and  expenses  which  he  mav  be  com-  Bk.  III. 
pelled  to  pay  (y).  Chap.6.Sect. 

Even  if  a  loss  sustained  by  a  firm  is  imputable  to  the 

conduct  of  one  partner  more  than  to  that  of  another,  Losses  attri- 
still  if  the   former   acted  bond  fide  with  a  view  to  the  ^'^J^. 
benefit  of  the  firm,  and   without  culpable   negligence,  morethan  to 
the  loss  must  be  borne  equally  by  all.1     Thus,  where  another. 
A.  represented  to  his  co-partner  B.  that  shares  in  a  cer-  Ex  parte 
tain  company  rendered  the  holders  only  liable  to  the  en-  Letts, 
gagements  of  the  company  to  a  limited  extent,  and  B. 
thereupon,  and  at  A.'s  request,  authorised  him  to  take 
shares  on   the   partnership   account,  and  it   ultimately 
turned  out  that  the  liability  of  the  shareholders  was  not 
limited,   and  A.    and  B.  were  made  contributories,  it 
was  held  that,  as  between  *  themselves,  B.  could  not  [  *  387] 
throw  the  loss  on  A.    alone   {z).     Again,   in    Cragg  v.  Cragg  v. 
Ford  (a),  the   plaintiff  and  the  defendant  were  part-  Ford- 
ners,   and  the  defendant   was   the  managing  partner. 
The  partnership  was  dissolved,  and  the  winding  up  of 
its  affairs  devolved  on  the  defendant.     Part  of  the  as- 
sets consisted  of  bales  of  cotton,  and  the  plaintiff  re- 
quested that   these   might  be   immediately   sold.      The 
defendant,  however,  delayed  to  sell  them,  and  they  were 
ultimately  sold  at  a  much  lower  price  than  they  would 
have  fetched  if  they  had  been   sold  when  the  plaintiff 
desired.     The  plaintiff  contended  that  the  loss  sustained 
by  the  postponement  of  the  sale  ought  to  be  borne  by 
the  defendant  alone.    But  the  Court  held  that  the  plain- 
tiff, if  he  had  chosen,  might  himself  have  sold  the  cotton; 
and  that,  as  the  defendant,  in  delaying  the  sale,  had  acted 
bond  fide  and  in  the  exercise  of  his  discretion,  the  loss 
ought  not  to  be  thrown  on  him  alone,  but  ought  to  be 
shared  by  the  plaintiff. 

But  if  a  partner  is  guilty  of  a  breach  of  his  duty  to  Losses  attri- 
the  firm,  and  loss  results  therefrom,  such  loss  must  fall  butable  to 
on  him  alone.     As  was   said   by  the  Court  in  Bury  v.  ^ondS  S 
Allen  (h),  "Suppose  the  case  of  an  act  of   fraud,  or  or  negli. 

(y)  Browne  v.  Gibbins,  5  Bro.  P.  C.  491;  Croxton's  case,  5  De 
G.  &  S.  432. 

(z)  Ex  parte  Letts  and  Steer.  26  L.  J.  Ch.  455.  See,  too,  Lin- 
gard  v.  Bromley,  1  V.  &  B.  114. 

(a)  1  Y.  &C.  C.  C.  280. 

(b)  1  Coll.  604. 

1  Want  of  extraordinary  caution  is  not  sufficient  to  throw  the 
loss  on  the  partner  through  whom  it  was  incurred,  if  it  resulted 
through  an  honest  mistake  of  judgment  or  from  some  trilling  de- 
parture from  the  partnership  agreement.  Tillotson  v.  Tillotson, 
34  Conn.  335  (1867);  Morrison  v.  Smith,  81  111.  221  (1876):  Lyles 
v.  Styles,  2  Wash.  C.  C.  224  (1808). 


gence. 


462  CONTRIBUTION  AND  INDEMNITY. 

Bk.  III.  culpable  negligence,  or   wilful    default   by   a   partner 

Chap.  6.  Sect.  ^uring  the  partnership  to  the   damage  of  its  property 

or  interests,  in  breach  of  his  duty  to  the  partnership  : 

whether  at  law  compellable  or  not  compellable,  he  is 
certainly  in  equity  compellable  to  compensate  or  indem- 
nify the  partnership  in  this    respect"  (c).1     In  con- 
formity with  this  rule,  the   justice  of   which   cannot  be 
disputed,  it  has  been  decided  that  if   a  claim  is  made 
against  a  firm  for  payment  of   a  debt  alleged  to  be  due 
from  it,  but  which  is  not  so  in  point  of   fact,  and  one 
partner  chooses  to  pay  it,  he  cannot  charge  such  pay- 
ment to  the  account  of  the  firm  (d).     So,  if  one  part- 
[  *  388]        ner  does  that  *  which,  though  imputable  to  the  firm  on 
the  principles  of  agency,  is  in  truth  bis  act  alone,  and 
a   fraud  upon    his    co- partners,   they    are    entitled,   as 
between  themselves  and  him,  to  throw  the  whole  of  the 
consequences  upon  him  (e).2     So,  if  one  partner,  with- 
out the  authority  of  his  co- partners,  wilfully  does  that 
which  is  illegal,  he  must  indemnify  them  from  the  con- 
sequences (/). 
Adoption  by       When  it  is  said  that  losses  incurred  by  the  unauth- 
firm  of  losses  orised.  culpably  neglect,  or   fraudulent  conduct  of  one 
not  charge-      partner  mU8t  be  borne  by  him  alone,  it  is  assumed  that 
able  to  it.       ^  conduct  kas  not  been  ratified  by  the   firm,  and  that 
the  loss   has  not  been  treated  by  the  partners   them- 
selves as  a  partnership  loss.     A   loss  which  is  properly 
chargeable  to  the  account  of  one  partner  only,  becomes 
chargeable  to  the  firm  if  the  partners  have  knowingly 
allowed  it  to  be  so  charged  in  their  accounts,  and  have 
thus  taken  it  upon   themselves.3     A  strong  instance  of 

(c)  See  ace.  Thomas  r.  Atherton,  10  Ch.  D.  185,  a  case  of  gross 
negligence  on  the  part  of  the  managing  partner  of  a  mine  work- 
ing beyond  the  boundary. 

{d)  lie  Webb,  2  B.  Moore,  500  ;  Mcllreath  v.  Margetson,  4 
Doug.  278.  where  a  payment  was  made  bond  fide  and  on  the  faith 
ot  false  and  fraudulent  representations.  Queere  if  the  same  rule 
would  apply  if  the  debt  being  due  was  barred  by  the  Statute  of 
Limitations.     See  Stahlschmidt  v.  Lett,  1  Sm.  G.  415. 

(e)  See  Robertson  v.  Southgate,  6  Ha.  540. 

(/)  See  Campbell  v.  Campbell,  7  CI.  &  Fin.  166,  ante  p.  378. 

1  Maher  v.  Bull,  44  111.  97  (1867). 

2  If  a  partner  mix  firm  money  with  his  own,  deposit  it  to  the 
credit  of  his  private  bank  account  and  uses  the  money  so  de- 
posited for  his  own  purposes,  he  must  bear  the  loss  should  the 
bank  fail.  Lefever  v.  Underwood,  41  Pa.  St.  505  (1862).  But 
he  is  not  liable  if  the  money  of  the  firm  is  deposited  with  his 
private,  funds  by  the  consent  of  his  partner.  Campbell  v.  Stewart, 
34  111.  151  (1864). 

3  See  Murphv  v.  Crafts.  13  La.  Ann.  519  (1858);  Cameron  v. 
Watson,  10  Rich.  (S.  Ca.)  Eq.  64  (1858). 


INTEREST.  463 

this    is  afforded   by  the    case  of    Cragg  v.  Ford   (g),  Bk.  III. 
already  referred  to  on  another  point.     There  the  plain-  Chap.  6. Sect. 

tiff  and  the  defendant  were  partners  ;  the  defendant  J 

had  engaged  in  adventures  not  authorised  by  the  part-  Cragg  v. 
nership  articles.  The  plaintiff  protested  against  this,  Ford, 
but  although  the  adventures  ended  in  loss,  and  that 
loss  was  charged  against  the  firm  in  the  partnership 
books,  the  plaintiff  did  not  at  the  time  object,  or  insist 
that  the  loss  should  be  borne  by  the  defendant.  "When, 
however,  the  partnership  was  dissolved,  and  its  accounts 
were  made  up,  the  plaintiff  refused  to  allow  the  losses 
in  question  to  be  charged  against  the  firm.  But  the 
Court  held  that,  under  all  the  circumstances  of  the 
case,  the  Master  who  had  charged  the  losses  against 
the  partnership  had  not  done  wrong  ;  and  exceptions 
which  had  been  taken  to  his  report  by  the  plaintiff 
were  overruled. 


*  Section  V. — Of  Interest.  [  *  389] 

The  principles  upon  which,  in  taking  partnership  ac-  interest  jn 
counts,  interest  is  allowed  or  disallowed,  do  not  appear  accounts  be- 
to  be  well  settled.      The  state  of    the    authorities   is,  in  tween  part- 
fact,  not  such  as  to  justify  the  deduction  from  them  of  ners- 
any  general  principle  upon  this  important  subject. 

By  the  common  law,  in  the  absence  of  a  special  cus-  General  rule 
torn  or  agreement,  a  loan  does  not  bear  interest  (h) ;  as  to  interest, 
and,  notwithstanding  many  dicta  to  the  contrary,  the 
same  rule  appears  to  have  prevailed  in  equity  (i). 
This  rule  is,  no  doubt,  attributable  to  the  old  notions 
on  the  subject  of  usury  ;  but  although  the  usury  laws 
are  abolished  the  rule  remains,  and  the  consequence  is 
that  interest  is  frequently  not  payable  by  law  when  in 
justice  it  ought  to  be. 

At  the  same  time,  by  the  custom  of  merchants  inter- 
est has  long  been  payable  in  cases  where  by  the  general 
law  it  was  not  ;  and  mercantile  usage  and  the  course 
of  trade  dealings  are  held  to  authorise  a  demand  for 
interest  in  cases  where  it  would  not  otherwise  be  pay- 

(g)  1  Y.  &  C.  C.  C.  285  ;  but  see  as  to  losses  arising  from  illegal 
acts,  the  observations  of  Lord  Eldon  on  Watts  v.  Brook,  in  Aubert 
r.  Maze,  2  Bos.  &  P.  371. 

[h)  See  Calton  v.  Bra«:g,  15  East,  223;  Higgins  v.  Sargent,  2 
B.  &  C.  349  ;  Shaw  v.  Picton,  4  ib.  723  ;  Page  v.  Newman,  9  B. 
&  C.  378  ;  Gwyn  V.  God  by,  4  Taunt.  346. 

(i)  See  Tew  v.  The  Earl  of  Winterton.  1  Ves.  J.  4.',1  ;  Creuzer. 
Hunter,  2  ib.  157  ;  Booth  v.  Leycester,  1  Keen,  217,  and  3  M.  & 
Cr.  459. 


464 


CONTRIBUTION  AND  INDEMNITY. 


Bk.  III. 
Chap.  6.  Sect. 
5. 


Interest  on 
capital. 


[  *  390] 


Interest  on 
advances  to^ 
the  firni. 


able  (k).  In  applying  therefore  the  general  rule 
against  the  allowance  of  interest  to  partnership  ac- 
counts, attention  must  be  paid  not  only  to  any  express 
agreement  which  may  have  been  entered  into  on  the 
subject,  but  also  to  the  practice  of  each  particular  firm, 
and  to  the  custom  of  the  trade  it  carries  on. 

As  a  general  rule  partners  are  not  entitled  to  interest 
on  their  respective  capitals  unless  there  is  some  agree- 
ment to  that  effect,  or  unless  they  have  themselves  been 
in  the  habit  of  charging  such  interest  in  their  ac- 
counts (Z);1  and  even  where  one  partner  has  brought  in 
his  stipulated  capital  and  the  other  *  has  not,  the 
former  will  not  be  entitled  to  interest  on  the  winding  up 
of  the  partnership  if  it  has  not  been  previously  charged 
and  allowed  in  the  accounts  of  the  firm  (in,)]2  and 
where  a  person  is  paid  for  his  services  by  a  share  of 
profits,  interest  on  capital  cannot  be  charged  against 
him,  unless  there  is  some  agreement  to  that  effect  (n). 
Moreover,  where  interest  on  capital  is  payable,  the  in- 
terest stops  at  the  date  of  dissolution  unless  otherwise 
agreed  (o);  3  and  undrawn  profits  are  not  necessarily 
to  be  treated  as  bearing  interest  like  the  capital  (p). 

An  advance  by  a  partner  to  a  firm  is  not  not  treated 
as  an  increase  of  his  capital,  but  rather  as  a  loan  on 
which  interest  ought  to  be  paid  ;  and  by  usage,  interest 
is  payable  on  money  bond  fide  advanced  by   one   part- 

(k)  See  Ex  parte  Chippendale,  4  De  G.  M.  &.  G.  36. 

{!)  See  Cooke  v.  Benbow,  3  De  G.  J.  &  Sm.  1  ;  Miller  v.  Craig, 
6  Beav.  433,  where  interest  was  allowed,  that  having  at  one 
time  been  in  accordance  with  the  usage  of  those  who  carried  on 
the  business  ;  and  Pirn  v.  Harris,  Ir.  Rep.  10  Eq.  442,  where  the 
decision  was  based  on  the  terms  of  the  contract. 

(m)  Hill  v.  King,  3  DeG.  J.  &  Sm.  418. 

(n)  Rishton  v.  Grissell,  5  Eq.  326,  where  the  capital  was  bor- 
rowed at  interest. 

(o)  Barfield  v.  Loughborough,  8  Ch.  1  ;  Watney®.  Wells.  2Cb. 
250  ;  Pilling  v.  Pilling,  3  De  G.  J.  &  Sm.  162.  contra,  on  this 
point  is  practically  overruled.  As  to  the  calculation  of  interest 
where  the  capital  is  payable  by  instalments  with  interest,  see 
Ewing  v.  Ewing,  8  App.  Ca.  822. 

(]))  Dinham  v.  Bradford.  5Ch.  519.  See,  also,  Rishton  v.  Gris- 
sell, 10  Eq.  393,  as  to  interest  on  arrears  of  a  share  of  profits. 

1  If  A.  contribute  all  the  capital  of  the  firm  and  B.  merely  his 
time  and  labor,  A.  cannot  claim  interest  on  his  contribution.  Tutt 
v.  Land,  50  Ga.  339  (1873);  Day  v.  Lockwood.  24  Conn.185  1 1  B55  |. 

2  It  is  disputed  in  America  whether  interest  shall  be  allowed 
in  this  case  or  not.  Stokes  v.  Hodges.  11  Rich.  Eq.  135  (1859  . 
Clark  v.  Warden,  10  Neb.  87  (1880)  disallow  it  :  it  is  allowed  in 
Hartman  v.  Woehr,  18  N.  J.  Eq.  383  (1867);  Ligare  v.  Peacock, 
109  111.  94  (1884);  Montague  v.  Hayes,  10  Gray,  609  (1858). 

3  Johnson  v.  Hartshorne,  52  X.  Y.  173  (1873);  Bradley  v.  Brig- 
ham,  137  Mass.  545  (1884). 


INTEREST.  465 

ner  for  partnership  purposes  ;  at  least  when  the   ad-  Bk.  III. 
vance  is  made  with  the   knowledge   of  the   other  part-  Chap.  6.  Sect. 

ners  (q).1     The  rate  of  interest  given  in  such  cases   is  J 

simple  interest  at  5  per  cent,  (r),  unless  a  different 
rate  is  payable  by  the  custom  of  the  particular  trade  (s), 
or  has  been  charged  and  allowed  in  the  books  of 
the  particular  partnership  (t).2 

Inasmuch  as  what  is  fair  for  one  partner  is  so  for  an-  Interest  on 
other,  and  the  firm  when  debtor  is  charged  with   inter-  overd  rowings 
est,  it  seems  to  follow  that  if  one  partner  is  indebted  ^  na^d 
to  the  firm  either  in  respect  of  money   borrowed;  or   in 
respect  of  balances  in  his  hands,  he  ought  to  be  charged 
with  interest  on  the  amount  so  owing,  even  though   on 
the  balance  of  the  whole  account,  a  *  sum  might  be  due  [  *  391] 
him  (u).      Except,  however,  where   there  has    been   a 
fraudulent  retention  (x),  or  an  improper  application  (y) 
of  money   of  the  firm,  it   is   not   the   practice    of    the 
Court  to  charge  a  partner  with  interest  on  money  of 
the  firm  in  his  hands  (z)\   for  example,  under  ordinary 
circumstances  a  partner  is  not  charged  with  interest  on 
sums  drawn  out  by  him  or  advanced  to  him  (a).      In  a 
case  (b),  A.   and  B.    were  partners  ;    A.   died,  and  his  Rhodes  v. 
son  and  executor  C.  succeeded  him  in  partnership  with  Rhodes. 
B.     B.  afterwards  retired  in  favour  of  his  own  son  D. 
At  the  time  of  B.'s  retirement,  a  considerable  sum  was 

(q)  See  Ex  parte  C'hippeudale,  4  De  G.  M.  &  G.  36.  See,  also, 
Omychund  v.  Barker,  Coll.  on  Partn.  231,  note;  Denton  v.  Rodie, 
3  Camp.  496.     But  see  contra,  Stevens  v.  Cook,  5  Jur.  N.  S.  1415. 

(r)  Ex  parte  Bignold,  22  Beav.  167  ;  Troup's  case,  29  ib.  353. 
See,  also,  Hart  v.  Clarke,  6  De  G.  M.  &  G.  254. 

(s)  As  to  compound  interest  in  the  case  of  hankers,  see  Bate  v. 
Robins,  32  Beav.  73  ;  Fergusson  v.  Fyffe,  8  CI.  &  Fin.  121. 

(t)  As  in  Be  Magdalena  Steam  Nav.  Co.,  Johns.  690,  where  6 
per  cent,  was  allowed. 

(it)  See  Beecher  r.  Guilburn,  Moseley,  3. 

(x)  As  in  Hutcheson  v.  Smith,  5  Ir.  Eq.  117,  where,  however, 
the  partner  retaining  the  money  was  also  a  receiver  appointed  by 
the  Court. 

(y)  As  in  Evans  v.  Coventry,  8  De  G.  M.  &  G.  835. 

(z)  See  Webster  i'.  Bray,  7  Ha.  159,  where  interest  on  balances  in 
the  hands  of  the  defendants  was  asked  for  but  not  given.  See,  too, 
Stevens  v.  Cook,  5. Jur.  N.  S.  1415;  Turner  r.  Burkinshaw,  2  Ch.  488. 

(a)  Cooke  v.  Benbow,  3  De  G.  J.  &  Sm.  1  ;  Meymott  v.  Mey- 
mott,  31  Beav.  445.     See  tbe  case  in  the  next  note. 

(b)  Rhodes  v.  Rhodes,  Johns.  653,  but  better  reported  in  6  Jur. 
N.  S.  600. 


1  Morris  v.  Allen.  11  N.  J.  Eq.  44  (1861);  Emerson  r.  Durand, 
64  Wis.  Ill  (1885);  Baker  r.  Mayo.  129  Mass.  517  (1880). 

2  An  agreement  that  on  such  advances  a  greater  rate  of  interest 
shall  be  allowed  than  that  fixed  by  statute  is  not  usurious. 
Cunningham  v.  Green.  23  Oh.  St.  296  (1872);  Campbell  v.  Co- 
quard,  16  Mo.  App.  552  (1885). 

*  7   LAW   OF   PARTNERSHIP. 


4GG 


CONTRIBUTION  AND  INDEMNITY. 


Bk.  III. 
Chap.  6.  Sect. 
5. 


Interest 
where  firm 
claims  what 
has  been  ob- 
tained by 
one  partner. 


[*392] 

Confused 
accounts. 


due  to  him  from  A.'s  estate  in  respect  of  monies  drawn 
out  by  A.  This  sum  was  treated  as  a  debt  of  the  new 
-  firm  of  C.  and  D.,  and  had  not  been  paid  off.  B.  having 
died,  his  executors  claimed  interest  from  the  time  of 
his  retirement  ;  but  the  claim  was  disallowed  on  the 
ground  that  no  agreement  to  pay  interest  had  been  en- 
tered into,  and  the  claim  was  opposed  to  the  course  of 
dealing  between  the  partners  themselves.1 

Where  one  partner  claims  a  benefit  obtained  by  his 
co-partner  and  succeeds  in  establishing  his  claim,  the 
claimant  is  charged,  as  the  price  of  the  relief  afforded, 
not  only  with  the  amount  actually  expended  by  his  co- 
partner in  obtaining  the  benefit,  but  with  interest  on 
that  amount  at  the  rate  of  5Z.  per  cent.  (c).  On  the 
other  hand,  if  one  partner  has,  in  breach  of  the  good 
faith  due  to  his  co-partners,  obtained  money  which  he 
is  afterwards  compelled  to  account  for  to  the  firm,  he 
will  be  charged  with  interest  upon  the  amount  at  the 
rate  of  4/.  per  cent,  (d).2 

*  Where  a  partnership  has  been  dissolved  by  the  death 
of  one  partner,  and  the  surviving  partner  keeps  the  ac- 
counts in  such  a  way  as  to  render  it  impossible,  until 
after  the  lapse  of  a  considerable  time,  to  ascertain  the 
balances  due  to  himself  and  his  deceased  partner, 
neither  the  surviving  partner  nor  his  representatives 
can  claim  interest  on  the  sum  ultimately  found  due  to 
him  or  his  estate  (e).3 

(e)  See  Hart  v.  Clarke,  6  De  G.  M.  &  G.  254.  See,  too,  Per- 
ens  v.  Johnson,  3  Sm.  &  G.  419. 

(d)  See  Fawcett  v.  Whitehouse,  1  E.  &  M.   132. 

(e)  Boddam  v.  Kylev,  1  Bro.  C.  C.  239  ;  2  ib.  2  :  and  4  Bro.  P. 
C.  561. 


1  It  depends  entirely  on  the  circumstances  of  each  case  whether 
or  not  interest  will  be  allowed  on  over  drafts.  Buchingham  v. 
Ludlum,  29  N.  J.  Eq.  345  (1878);  Gyger's  Appeal,  62  Pa.  St. 
73  (1869). 

2  For  instances  of  disallowance  of  interest  to  a  partner  who 
wrongfully  collects  and  withholds  money,  see  Sanders  v.  Scott, 
68  Ind.  130  (1879)  ;  Turner  v.  Otis,  30  Kans.  1  (1883).  Cases  of 
bad  faith  are  sometimes  published  by  a  charge  of  interest  com- 
pounded with  annual  rests.  Johnson  v.  Hartshorne,  52  N.  Y. 
173  (1873)  ;  Heath  v.  Waters,  40  Mich.  457  (1899). 

3  Just  as  soon  as  the  balances  are  struck  on  the  dissolution 
of  a  firm  they  begin  to  bear  interest  as  against  those  partners 
who  hold  the  firm  assets  or  have  received  the  most.  Holden  v. 
Peace,  4  Ired.  Eq.  223  (1846)  ;  Clark  v.  Dunnam,  46  Cal.  204 
(1873)  ;  Sanderson  v.  Sanderson,  20  Fla.  292  (1883).  If  the  sur- 
viving partner  on  whom  has  devolved  the  settlement  of  the  busi- 
ness of  the  firm  unnecessarily  delays  the  sett  lenient,  he  will  not 
be  allowed  interest  on  his  own  balance.  Forward  v.  Forward,  6 
Allen,  494  (1863).  So  where  a  partner  has  fraudulently  denied  the 
amount  due  his  associate.  Dunlap  v.  Watson,  124  Mass.  305  (1878). 


DIVISION  OF  PROFITS.  467 


*  CHAPTER  VII.  [*393] 

OF  THE  DIVISION  OF  PROFITS. 

The  realisation  and  division  of  profit  is  the  ultimate  Bk.  III. 
object  of  every   partnership;  and  the  right  of  every  Chap.  7. 
partner  to  a  share  of  the  profits  made  by  the  firm  to  Division  0f 
which  he  belongs,  is  too  obvious  to  require  comment,  profits. 
Where  there  is  no  right  to  share  profits,  there  can   be 
no  partnership,  and   almost  all  the  other  rights   pos- 
sessed by  partners  may  be  said  to  be  incidental  to  the 
right  in  question. 

The  times  at  which  the  profits  are  to  be  divided,  the  Times,  &c, 
quantum  to  be  divided  at  any  one  time,  the  sums,  if  of  division, 
any,  which  are  to  be  placed  to  the  debit  of  the  firm  in 
favour  of  any  particular  partner  for  salary,  interest  on 
capital,  &c,  before  any  profits  are  to  be  divided,  these 
and  all  similar  matters  are  usually  made  the  subject  of 
express  agreement;  but  where  no  such  agreement  has 
been  made,  and  no  tacit  agreement  relative  to  them 
can  be  inferred,  the  principles  laid  down  in  the  preced- 
ing chapter  must  be  applied  (a).  With  respect  to  the 
times  of  division  and  quantum  to  be  divided  at  any 
given  time,  it  is  conceived  that  the  majority  must  gov- 
ern the  minority  where  no  agreement  upon  the  subject 
has  been  come  to  (6);  '  for  these  are  matters  of  purely 
internal  regulation,  and  with  respect  to  such  matters  a 
dissentient  minority  have  only  one  alternative,  viz., 
either  to  give  way  to  the  majority,  or,  if  in  a  position 
so  to  do,  to  dissolve  the  partnership. 

[a)  As  to  the  mode  of  ascertaining  profits  where  a  person  not 
a  partner  is  entitled  to  a  share  of  them,  see  Rishton  v.  Grissell, 
5  Eq.  326,  and  10  Eq.  393  ;  Geddes  v.  Wallace,  2  Bli.  270. 

(b)  See  Stevens  v.  South  Devon  Rail.  Co.,  9  Ha.  32(>,  and  Corry 
v.  Londonderry,  &c.,  Co.,  29  Beav.  2G3,  as  to  declaring  dividends 
before  paying  debts  ;  Browne  v.  Monmouthshire,  &c.,  Co.,  13 
Beav.  32,  as  to  paying  dividends  before  works  are  finished. 


See  Kennedy  v.  Kennedy,  3  Dana.  239  (1835). 


468 


DIVISION  OF  PROFITS. 


[  *  394] 

Bk.  III. 
Chap.  7. 

"What  is 
divisible  as 
profit. 


Cases  where 
dividends 
have  been 
held  not 
improper. 


*  Profit  is  the  excess  of  receipts  over  expenses  (c) ; ' 
and  in  winding  up  a  partnership,  nothing  is  properly- 
divisible  as  profit  which  does  not  answer  this  descrip- 
tion. But  for  the  purposes  of  business,  and  of  facili- 
tating annual  divisions  of  profits,  a  distinction  is  made 
between  ordinary  and  extraordinary  receipts  and  ex- 
penses; and  whilst  all  extraordinary  expenses  are  fre- 
quently defrayed  out  of  capital,  and  out  of  money 
raised  by  borrowing,  the  ordinary  expenses  are  defrayed 
out  of  the  returns  of  the  business;  and  the  profits  divisi- 
ble in  any  year  are  ascertained  by  comparing  the  ordi- 
nary receipts  with  the  ordinary  expenses  of  that  year. 
It  is  obvious  that,  unless  some  such  principle  as  this 
were  had  recourse  to,  there  could  be  no  division  of 
profits,  even  of  the  most  flourishing  business,  whilst 
any  of  its  debts  were  unpaid,  and  any  of  its  capital 
sunk.  What  losses  and  expenses  ought  to  be  treated 
as  ordinary,  and  therefore  payable  out  of  current  re- 
ceipts, and  what  ought  to  be  treated  as  extraordinary, 
and  payable  legitimately  out  of  capital  or  money  bor- 
rowed, is  a  question  on  which  opinions  may  often  hon- 
estlv  differ;  and  one  which,  when  open  to  honest  di- 
versity of  opinion,  a  majority  of  members  can  lawfully 
determine  (d).  But  if  the  current  receipts  exceed  the 
current  expenses,  the  writer  apprehends  that  the  differ- 
ence can  be  divided  as  profit,  although  the  capital  may 
be  spent  and  not  be  represented  by  saleable  assets  (e). 

Under  ordinary  circumstances,  and  in  the  absence 
of  any  agreement  to  the  contrary,  monies  earned  ought 
to  be  treated  as  profits  of  the  year  in  which  they  are 
received  and  not  as  profits  of  the  year  in  which  they 
are  earned  (/).2 


(c)  As  to  the  payment  of  income-tax,  see  Last  v.  London  Ass. 
Corp.,  10  App.  Ca.  438  ;  Lawless  v.  Sullivan,  6  App.  Ca.  373  ; 
and  where  business  is  carried  on  abroad,  see  Colquhoun  v.  Brooks, 
19  Q  B.  D.  400  ;  Erichsen  v.  Last,  8  Q.  B.  D.  414  ;  Cesena  Sul- 
phur Co.  v.  Nicholson,  1  Ex.  D.  428;  Sully  v.  A.-G.,  5  H.  &  N.  711. 

(d)  See  Gregory  v.  Patchett,  33  Beav.  595. 

(e)  As  to  the  construction  of  clauses  relating  to  payment  of 
dividends  out  of  profits,  see  Davison  v.  Gillies,  16  Ch.  D.  347, 
n.  ;  Dent  v.  London  Tramways  Co.,  ib.  344.  As  to  payingdivi- 
dends  out  of  capital,  Bloxam  v.  Metropolitan  Kail.  Co.,  3  Ch. 
337  ;  Flitcroft's  case.  21  Ch.  D.  519.  This  subject  will  be  more 
fully  discussed  in  the  vol.  on  Companies. 

(/)  See  per  Turner,  L.  J.,  in  Maclaren  v.  Stainton,  3  De  G. 
F.  &  J.  214.     Compare  Browne  v.  Collins,  12  Eq.  586. 

1  To  ascertain  the  "net  profits"  of  a  business  it  is  not  right 
to  deduct  interest  on  capital  employed.  Tutt  v.  Land,  50  Ga. 
339  (1873). 

2  See  Greene  v.  Ferrie,  1  Desaus,  164  (1790). 


DIVISION  OF  PROFITS.  469 

*  As  will  be  seen  hereafter,  in  the  absence  of  an  express  [  *  395] 
agreement  to  that  effect,  partners  have  no  right  to  expel  Bk.  III. 
one   of   their   number   nor  to    forfeit   his    share    (g).  Chap.  7. 
Neither  can  they  exclude  him   from   the  enjoyment   of  Exclusion 
his  share  of  profits  (h).     A  partner  so  excluded  can  from  share  of 
compel  his  co-partners  to  restore  him  to  his  rights  and  Pronts- 
account  to  Lira  accordingly  (»'). 

(g)  Infra,  bk.  iv.  ch.  1,  §  1. 

(A)  Griffith  v.  Paget,  5  Ch.  D.  894 ;  Adley  v.  The  Whitstable 
Co.,  17  Ves.  315,  19  ib.  304,  and  1  Mer.  107. 

( i)  Ib. ;  and  see  infra,  ch.  10,  under  the  heads  Account  and  In- 
junction. 


470  PARTNERSHIP  ACCOUNTS. 


[  *  396]  *CHAPTER  VIII. 

OF   THE   ACCOUNTS   OF   PARTNERSHIPS. 

Bk.  III.  IN  the  present  Chapter  it  is  proposed  to  consider,  (1), 
Chap.  8.          the  mode  in  which  partnership  accounts  are  kept;   (2), 
the  duty  of  keeping  and  the  right  of  inspecting  the  ac- 
counts of  partnerships.     The  subject  of  opening  settled 
accounts  will  be  referred  to  in  a  subsequent  Chapter. 


Section  I. — Of  the  Mode  of  Keeping  Partnership  Ac- 
counts. 

Partnership  ^  *8  usual  among  mercantile  men  to  treat  all  the  ac- 
accounts.  counts  of  a  partnership  as  accounts  of  the  firm,  and  to 
deal  with  the  accounts  of  individual  partners  as  if  they 
were  simply  debtors  or  creditors  of  the  firm.  The  prop- 
erty brought  into  the  concern  is  credited  to  the  stock 
account  of  the  firm,  and  is  then  distributed  through  the 
ledger  accounts;  and  in  these  ledger  accounts  the  sev- 
eral articles  and  persons  are  made  debtors  to  stock  for 
the  several  items  passed  into  these  accounts.  Each 
partner  has  his  own  separate  account  opened  with  the 
firm  (usually  in  a  private  ledger),  and  is  credited  with 
everything  he  brings  into  it,  and  is  debited  with  every- 
thing he  draws  out  of  it.  Upon  a  rest,  the  net  profits 
are  determined,  and  are  divided  between  the  partners 
in  the  proper  proportions,  and  the  share  of  each  partner 
is  carried  to  the  credit  of  his  own  separate  account. 
The  partners  are  creditors  of  the  firm  for  all  its  stock, 
and  they  are  debtors  to  it  for  all  its  deficiencies.  When 
they  first  bring  in  their  capital,  the  firm  is  in  the  pri- 
vate ledger  made  debtor  to  each  of  them  for  his  propor- 
tion of  capital.  Whenever  stock  is  taken,  and  a  surplus 
appears,  that  surplus  is  divided  according  to  the  shares, 
r  *  3Q7  -j  and  is  carried  to  the  *  accounts  of  the  respective  part- 
ners.  If,  instead  of  a  surplus,  a  deficiency  appears,  the 
loss  is  apportioned  in  the  same  way  (a). 

(a)  See  Cory  on  Accounts,  ed.  2,  p.  71  ct  seq. 


PARTNERSHIP  ACCOUNTS.  471 

Each  partner  being  thus   treated  like   an   ordinary  Bk.  ni. 
creditor  and  debtor,  in  respect  of  what  he  brings  in  and  ^haP-  8-  Sect. 

what  he  draws  out,  the  balance  standing  to  his  credit  J 

or  to  his  debit,  as  the  case  maybe,  in  the  private  ledger,  Mode  of 
shows  how  his  account   with  the  firm   stands.     Upon  ascertaining 
payment  of   that  balance  by  the  firm  to  him,  if  the  share "i * 
balance  is  in  his  favour,  or  by  him  to  the  firm,  if  the  proiit  or 
balance  is  against  him,  his   account   with   the   firm  is  loss, 
closed  and  settled. 

Each  partner's  share  of  a  profit  to  be  divided,  or  of 
a  loss  to  be  made  good,  is  ascertained  by  a  simple  rule 
of  three  calculation.  If  the  partners  have  agreed  to 
share  profits  and  losses  equally,  the  share  of  each,  of 
any  particular  profit  or  any  particular  loss  is  ascertained 
by  dividing  the  whole  profit  or  whole  loss,  as  the  case 
may  be,  by  the  number  of  partners.  If,  however,  the 
partners  share  profits  and  losses  in  proportion  to  their 
respective  capitals,  then  as  the  united  capitals  are  to 
the  whole  profit  or  whole  loss,  so  will  each  partner's 
share  of  capital  be  to  his  share  of  such  profit  or  loss. 

In  order  to  illustrate  the  principle  upon  which  part-  Examples, 
nership  accounts  are  kept  let  it  be  supposed  that  A., 
B.  and  C  are  partners,  with  a  capital  of  3,O00Z.  sub- 
scribed by  them  equally  ;  that  they  share  profits  and 
losses  in  proportion  to  their  respective  capitals,  and 
that  A,  has  drawn  out  500Z.  and  B.  has  advanced  100Z. 
There  are,  then,  three  cases  to  be  considered. 

Case  1. — Where  there  are  no  profits  or  losses. 

The  accounts  will  then  stand  thus  (b)  : — 

1.   Partnership  Account. 

Dr.  to  stock 3000  0  0  Cr.  by  A.  's  sum  with- 

to  B.  for  advance     .    100  0  0         drawn 500  0  0 

by  balance     ....  2600  0  0 


£3100  0  0  £3100  0  0 


*2.   A.' •s  Account.  [  *  398] 

Dr.  to  sum  withdrawn     500  0  0  Cr.  by  capital  ....  1000  0  0 
to  balance  ....    500  0  0 


£1000  0  0  £1000  0  0 


(b)  In  this  ca.se  no  notice  is  taken  of  interest.      In  eases  two 
and  3  interest  is  supposed  to  be  calculated. 


472 


PARTNERSHIP  ACCOUNTS. 


Bk.  III. 


Chap.  8.  Sect.  ~ 


Examples. 


to  balance  . 


3.  B.'s  Account. 

Or.  by  capital   . 
.  1100  0  0         by  advance 


£1100  0  0 


.  1000  0  0 
.    100  0  0 

£1100  0  0 


Dr. 


to  balance 


4.   C/s  Account. 

Or.  by  capital 
.  1000  0  0 


£1000  0  0 


1000  0  0 


£1000  0  0 


5.  Balance  Sheet. 

Dr.  to  balance  as  above  Or.  by  balance  due  as 

(from  1) 2600  0  0         above  to  A.    ...    500  0  0 

"  B.     .    .    .  1100  0  0 

"  C.     .    .    .  1000  0  0 


£2600  0  0 


£2600  0  0 


Case  2. — Where  there  is  a  profit  to  be  divided. 

The  accounts  will  then  stand  as  under,  if  the  profit 
is  supposed  to  be  1000?.,  and  interest  at  5  per  cent,  is 
charged  on  all  sums  brought  in  and  taken  out  by  each 
partner,  and  on  his  capital. 

1.  Partnership  Account. 

Dr.  to  stock 3000  0  0  O.by  A.'s  sum  with- 

to  interest  on  ditto  for  drawn  with  inter- 

one  year  ....    150  0  0         est  for  one  year  .    .    525  0  0 
to  B.  for  advance  with 

interest  for  1  year  105  0  0 
to  profit 1000  0  0         by  balance  ....  3730  0  0 


£4255  0  0 


£4255  0  0 


[  *  399] 


*  2.  A.h  Account. 

Dr.  to  sum  withdrawn  Or.  by   capital  ....  1000  0  0 

with   interest    for  by  interest  on   ditto     50  0  0 

one   year  ....  525  0  0      by   i  share   of  profit  333  6  8 

to  balance 858  6  8 


£1383  6  8 


£1383  6  8 


3.  B.'s  Account. 


Dr. 

to  balance 


1488  6  8 


Or.  by  capital  .    .    .    .  1000  0  0 
by  interest  on  ditto     50  0  0 
by  advance   and    in- 
terest  thereon  .    .    105  0  0 
by  J  share  of  profits  333  6  8 


£1488  6  8 


£1488  6  8 


PARTNERSHIP  ACCOUNTS.  -173 

4.   C.'s  Account.  Bk.  III. 

Chap.  8.  Sect. 
Dr.  Cr.  by  capital  ....  1000  00], 

by  interest  on   ditto    50  0  0  — 

to  balance 1383  6  8      by  J  share  of  profits  333  6  8  Examples. 

£1383  6  8  £1383  6  8 


5.   Balance  Sheet. 

Dr.    to    balance    as  Cr.  by   balance   due  as 

above  (from  1)  .      3730  0  0      above  to  A 858  6  8 

"      to  B 1488  6  8 

"      to  C 1383  6  8 

£3730  0  0  £3730  0  0 


Case  3. — Where  there  is  a  loss  to  be  made  good. 

Then  if  the  loss  is  supposed  to  be  5000?.,  and  inter- 
est is  calculated  as  in  the  last  example,  the  accounts 
will  stand  thus  : — 

1.  Partnership  Account. 

Dr.  to  stock 3000  0  0  Cr.  by  loss 5000  0  0 

to  interest   on   ditto  by   A.  's    sum    with- 

for   one    year  .    .    150  0  0  drawn  with  interest 

to  B.  for  advance  for  one  year  .    .    .    525  0  0 

with   interest 

for   one   year  .    .    105  0  0 
to  balance 2270  0  0 


£5525  0  0  £5525  0  0 


*  2.  A.'s  Account  [*400] 

Dr.  to  sum  withdrawn  Cr.  by  capital  ....  1000     0  0 

with   interest    for  by  interest  on  ditto  .    50     0  0 

one  year  ....    525  0  0 

to  £  share  of  loss  .  1G66  13  4       by  balance   ....  1141  13  4 


£2191  13  4  £2191   13  4 


3.  B.'s  Account. 

Dr.  to  i  share  of  loss  1666  13  4  Or.  by  capital  .    .    .    .1000     0  0 

by  interest  on   ditto     50     0  0 
bv  advance  with  in- 
terest      105     0  0 

by    balance  .    .    .    .    511  13  4 


£1666  13  4  £1666  13  4 


474 


PARTNERSHIP  ACCOUNTS. 


Bk.  III. 

Chap.  8.  Sect. 
1. 

Examples. 


4.    C.'-s  Account. 

Dr.  to  J  share  of  loss  1666  13  4  Or.  by  capital  ....  1000    0  0 

by  interest  on  ditto     50     0  0 
by  balance 616  13  4 


£1666  13  4 


£1666  13  4 


5.  Balance  Sheet. 


Dr.  to  balance  due  as 

above  from  A.   .    .  1141  13  4 
"  B.    .    .    511  13  4 

"  C.   .    .    616  13  4 


Effect  of 
each  partner 
being  his 
own  creditor 
or  debtor. 


In  what 
sense  a 
partner  is 

[  *  401] 
debtor  to  or 
creditor  of 
the  firm. 


Or.  by bal  an  ce  as  above 

(from  1)  .    .    .    .      2270     0  0 


£2270     0  0 


£2270     0  0 


The  balances  ultimately  arrived  at  in  the  foregoing 
accounts  are  the  sums  payable— in  the  first  two  cases 
by  the  firm,  to  the  individual  partners,  and  in  the  last 
case  to  the  firm  by  them — in  order  to  wind  up  the 
affairs  of  the  firm.  But  it  must  not  be  imagined  that 
the  balances  in  question  are  debts  owing  to  each  part- 
ner by  his  co-partners.  The  balances  are  owing  by  and 
to  the  firm,  and  each  partner  being  included  in  the  firm 
is,  to  the  extent  of  his  share,  his  own  debtor  and  his 
own  creditor. 

Accountants  are  quite  right  in  debiting  each  partner 
in  his  account  with  the  firm  with  the  whole  of  what- 
ever he  draws  out,  and  in  crediting  him  with  the  whole 
of  whatever  he  brings  in.  *  "But,"  as  observed  by 
Lord  Cottenham,  "though  these  terms  'debtor'  and 
'creditor'  are  so  used,  and  sufficiently  explain  what  is 
meant  by  the  use  of  them,  nothing  can  be  more  incon- 
sistent with  the  known  law  of  Partnership,  than  to 
consider  the  situation  of  either  party  as  in  any  degree 
resembling  the  situation  of  those  whose  appellation  has 
been  so  borrowed.  The  supposed  creditor  has  no 
means  of  obtaining  payment  of  his  debt ;  and  the  sup- 
posed debtor  is  liable  to  no  proceedings  either  at  law 
or  in  equity — assuming  always  that  no  separate  securi- 
ty has  been  taken  or  given  (c).  The  supposed  cred- 
itor's debt  is  due  from  the  firm  of  which  he  is  a  partner  ; 
and  the  supposed  debtor  owes  the  money  to  himself  in 
common  with  his  partners"  (d).1 

(e)  The  remedies  available  by  one  partner  against  another  will 
be  examined  hereafter.     See,  also.  ante.  p.  110. 

(d)  Richardson  v.  The  Bank  of  England,  4   M.  &#  Cr.  171-2. 

1  Advances  by  a  partner  to  a  firm  do  not  really  constitute  debts 
of  the  firm,  although  properly  taken  into    account  at  the  final 
settlement  between  the  partners.     Wilson  v.  Soper,  13  B.  Mon 
411  (1853). 


PARTNERSHIP  ACCOUNTS.  475 

The  final   adjustment  of  a  partnership   account  fre-  Bk.  III. 
quently  gives  rise  to  questions  of  some  difficulty.      One  ^naP-  8-  Sect. 

is,  whether  the   principles  on  which  profits  and  losses  J 

have  been  previously  ascertained  are  to  be  adhered  to,  Ultimate 
or  whether  they  are  to  be  more  or  less  departed  from  ;  adjustment 
another  is,  whether  on  a  tiDal  adjustment  of  accounts  °  accoun  s> 
anything  can  be  regarded  as  profit  or  loss  until  the 
capitals  of  the  partners  have  been  repaid  or  exhausted 
as  the  case  may  be.  In  order  to  solve  these  and 
similar  questions  regard  must  always  be  had  to  the 
terms  of  the  partnership  articles  ;  but  an  express 
agreement  with  *  reference  to  the  taking  of  accounts  [  *  402] 
may  be,  and  frequently  is,  only  applicable  to  the  case 
of  a  continuing  partnership,  and  may  not  be  intended 
to  be  observed  on  a  final  dissolution  of  the  firm,  or  even 
on  the  retirement  of  one  of  its  members  (e).  A  similar 
observation  applies  to  the  mode  in  which  the  partners 
themselves  have  been  in  the  habit  of  keeping  their 
accounts  :  that  which  has  been  done  for  the  purpose  of 
sharing  annual  profits  or  losses  is  by  no  means  neces- 
sarily a  precedent  to  be  followed  when  a  partnership 
account  has  to  be  finally  closed  (/).  Bearing  these 
observations  in  mind,  the  following  rules  are  submitted 
as  those  which  ought  to  be  followed  upon  a  final  settle- 
Suppose  that  a  firm  consists  of  three  partners,  A.,  B.,  and  C. ; 
that  their  respective  capitals  are  a,  b,  c,  and  that  they  share 
profits  and  losses  in  proportion  to  those  capitals.  Then  a-\-b-\-o 
will  be  the  joint  capital  of  the  three  partners  ;  and  if  M.  repre- 
sents the  amount  of  loss  or  gain  to  be  shared,  A.'s  share  of  such 

loss  or  gain  will  be      ..^Xa  ;  B.'s  share  will  be      ,  .   ,    X  b; 

M 

and  C.  's  share  will  he     ,  .  ■     Xc.     Upon  precisely  the  same  prin- 
ciple, if  the  firm  is  indebted  to  A.  in  a  sum  a',  A.  will  owe  him- 
self in  respect  of  this  debt — r-r-j — X  «:  B.  will  owe'  A. — r-, — t— 
r  «■+£>+  c  a-f-6  -fc 

a' 
X  &;  and  C.  will  owe  A. — m — X  c-     So  lf  B.  is   indebted    to 

the  firm  in  a  sum  b';  B.  will  owe  himself  in  request  of  this  debt 

b'  b' 

„  ,  ,■  ,  ■    X  b  ;  he  will  owe  A. — j-n —  X   a  ;     and    will    owe    C. 
a-\-b-\-c  a-\-b-\-c 

4-Xc. 
a  -f-  b  -\-  c 

(e)  See,  for  examples,  Lawes  r.  Lawes,  9  Ch.  D.  98  ;  London 
India  Rubber  Co.,  5  Eq.  519  ;  Blisset  v.  Daniel,  10  Ha.  493  ; 
Wade  v.  Jenkins,  2  Giff.  509 ;  Wood  r.  Scoles,  1  Ch.  369  ;  and  as 
to  interest,  ante,  p.  390.  note  (<>).     Compare  Be  Barber,  5Ch.  G87. 

(/)  For  example,  the  value  of  goodwill  seldom,  if  ever,  ap- 
pears in  annual  accounts,  s<c  Steuart  v.  Gladstone,  10  Ch.  D.  626, 
659  ;  Wade  v.  Jenkins.  2  Griff.  509. 


476  PARTNERSHIP  ACCOUNTS. 

Bk.  III.  ment  of  partnership   accounts,  where  there  is  nothing 

Chap.  8.  Sect.  ejse  ^0  8erve  as  a  guide. 

-1 In  adjusting  the  accounts  of  partners,  losses  ought 

Rules  to  be  to  be  paid,  first  out  of  assets  excluding  capital,  next  out 
observed.         Qf  capital,  and  lastly  by  having  recourse  to  the  partners 

individually   (g)\    and  the  assets  of    the    partnership 

should  be  applied  as  follows  : 

1.  In  paying  the  debts  and  liabilities  of  the  firm  to 
non-partners  ; 

2.  In  paying  to  each  partner  rateably  what  is  due 
from  the  firm  to  him  for  advances  as  distinguished  from 
capital  (h)  ; 

3.  In  paying  to  each  partner  rateably  what  is  due 
from  the  firm  to  him  in  respect  of  capital  ; 

4.  The  ultimate  residue,  if  any,  will  then  be  divisible 
as  profit  between  the  partners  in  equal  shares,  unless 
the  contrary  can  be  shown. 

If  the  assets  are  not  sufficient  to  pay  the  debts  and 
liabilities  to  non-partners,  the  partners  must  treat  the 
difference  as  a  loss  and  make  it  up  by  contributions 
inter  se.  If  the  assets  are  more  than  sufficient  to  pay 
[  *  403]  the  debts  and  liabilities  of  the  *  partnership  to  non- 
partners,  but  are  not  sufficient  to  repay  the  partners 
their  respective  advances,  the  amount  of  unpaid  ad- 
vances ought,  it  is  conceived,  to  be  treated  as  a  loss,  to 
be  met  like  other  losses.  In  such  a  case  the  advances 
ought  to  be  treated  as  a  debt  of  the  firm,  but  payable 
to  one  of  the  partners  instead  of  to  a  stranger  (i).  If 
after  paying  all  the  debts  and  liabilities  of  the  firm  and 
the  advances  of  the  partners,  there  is  still  a  surplus, 
but  not  sufficient  to  pay  each  partner  his  capital,  the 
balances  of  capitals  remaining  unpaid  must  be  treated 
as  so  many  losses  to  be  met  like  other  losses  (A;).1 
Equality  of  The  only  case  which  practically  gives  rise  to  diffi- 
loss  and  culty,  is  when  partners  have  advanced,  or  agreed  to  ad- 

inequality  of  vanC6)  Unequal  capitals  and  to  share  profits  and  losses 
equally.  If  nothing  more  than  this  is  agreed,  a  defi- 
ciency of  capital  must  be  treated  like  any  other  loss; 

(g)  See  Binney  v.  Mutrie,  12  App.  Ca.  160  ;  Crawshay  v.  Col- 
lins, 2  Russ.  347,  and  Richardson  r.  Bank  of  England,  4  M.  & 
Cr.  173. 

(h)  These  come  before  costs  of  winding-up,  see  Potter  v.  Jack- 
son, Ch.  D.  845  ;  Austin  v.  Jackson,  11  ib.  942,  note. 

(0  See  Wood  v.  Scoles,  1  Ch.  369. 

{k)  See  the  next  two  notes. 

1  Rowland  v.  Miller,  7  Phila.  362  (1870);  Livingston  r. 
Blanchard,  130  Mass.  341  (1881);  Jackson  v.  Crapp,  32  Ind.  422 
(1869);  Keaton  v.  Mavo,  71  Ga.  649  (1883);  Frigerio  v.  Crottes, 
20  La.  Ann.  351  (1868). 


PAKTNERSHIP  ACCOUNTS.  477 

and  the  assets  remaining  after  payment  of  all  debts  Bk.  III. 
and  advances  must  be  distributed  amongst  the  part-  Chap.  8.  Sect. 

ners  so  as  to  make  each  partner's  loss  of  capital  equal;  J 

and  if  the  assets  are  not  sufficient,  there  must  be  such 
a  contribution  amongst  the  partners,  or  some  of  them, 
as  to  put  all  on  an  equality  (Z).1  But,  if  the  true 
meaning  of  the  partners  is  that  all  debts  shall  be  paid 
out  of  the  assets,  and  that  any  surplus  assets  remain- 
ing after  payment  of  debts  shall  be  divided  between 
the  partners  in  proportion  to  their  interests  therein  or 
to  their  capitals,  effect  must  be  given  to  such  an  agree- 
ment, and  those  partners  who  agree  to  bring  in  most 
capital  will  lose  most  (m).2 


*  Section  II. — Of  the  Duty  to  Keep  and  the  Eight  to  [  *  404] 
Inspect  Partnership  Accounts. 

It  is  one  of  the  clearest  rights   of  every  partner  to  Duty  to 
have  accurate  accounts  kept  of  all  money  transactions  keep  proper 
relating  to  the  business  of  the  partnership,  and  to  have  accounts, 
free  access  to  all  its  books  and  accounts  (n).3     So  im- 
portant is  it  to  every  partnership  that  proper  accounts 
shall  be  kept  and  be  accessible  to  all  the  partners,  that 
whenever  any  written  articles  of  partnership  are  enter- 
ed into,  clauses  are  inserted  for  the  purpose  of  remov- 
ing whatever  doubts  there  might  otherwise  be  upon  the 

(1)  Binney  v.  Mutrie,  12  App.  Ca.  160.  See  the  form  of  order 
there;  see,  also,  Nowell  v.  No  well,  7  Eq.  538;  Anglesea  Colliery 
Co.,  2  Eq.  379,  and  1  Ch.  555;  Ex  parte  Maude,  6  Ch.  51.  Com- 
pare Holyford  Mining  Co.,  Ir.  Rep.  3  Eq.  208. 

(m)  Wood  v.  Scoles,  1  Ch.  369,  is  an  instance  of  such  a  case. 

(n)  Seeder  Lord  Eldon  in  Rowe  v.  Wood,  2  Jac.  &  W.  558-9, 
and  in  Goodman  v.  Whitcomb,  1  ib.  593. 


1  A.  contributed  a  larger  amount  of  cash  to  the  firm  than  B. 
The  latter  gave  all  his  time  to  the  business,  the  former  no  time 
at  all.  They  were  to  share  profits  and  losses  equally,  but  had 
made  no  arrangement  providing  for  the  distribution  of  the  capi- 
tal. On  dissolution  after  loss  of  part  of  the  firm's  capital  it  was 
held  that  the  remaining  property  must  be  divided  in  proportion 
to  the  cash  contributions  of  the  partners  and  that  B.  should  pay 
A.  one-half  of  the  difference  between  what  he  had  invested  in 
the  business  and  what  his  share  of  the  remaining  capital  came 
to.     Jackson  v.  Crapp,  32  Ind.  422  (1869). 

2  Whitcmnb  v.  Converse,  119  Mass.  38  (1875);  Maley  v.  Brine, 
120  Mass.  324  (1876). 

3  Hall  v.  Clagett,  48  Md.  223  (1877);  Godfrey  v.  White,  43 
Mich.  171  (1880). 


478 


PARTNERSHIP  ACCOUNTS. 


Bk.  III. 
Chap.  8.  Sect. 


and  to  allow 
them  to  be 
examined. 


[*405] 

Effect  of 
keeping  no 
books  or  of 
destroying 
them. 


subject.  The  usual  nature  and  the  general  effect  of 
such  clauses  will  be  adverted  to  in  the  next  chapter, 
and  the  right  to  discovery  in  an  action,  will  also  be 
discussed  hereafter.  In  the  present  place  it  will  be 
sufficient  to  observe,  that  it  is  the  duty  of  every  part- 
ner to  keep  precise  accounts  and  to  have  them  always 
ready  for  inspection  (o).  One  partner  has  no  right  to 
keep  the  partnership  books  in  his  own  exclusive  cus- 
tody, or  to  remove  them  from  the  place  of  business  of 
the  partnership  (p).  In  the  absence  of  an  express 
agreement  to  the  contrary,  every  partner  has  a  right, 
without  the  permission  of  his  co-partners,  to  inspect, 
examine,  and  make  extracts  from  all  the  books  of  the 
firm  (q) ;  and  no  partner  can  deprive  his  co-partners 
of  this  right  by  keeping  the  partnership  accounts  in  a 
private  book  of  his  own,  containing  other  matters  with 
which  they  have  no  concern  (?*).  At  the  same  time.,  if 
a  person  entitled  to  a  share  of  the  profits  of  a  business 
expressly  agrees  that  he  will  accept  the  balance  sheets 
prepared  by  others  as  correct,  and  will  not  investigate 
the  books  or  accounts  himself,  he  will  be  bound  by 
that  agreement  (s).1 

*  If  no  books  of  account  at  all  are  kept,  or  if  they  are 
so  kept  as  to  be  unintelligible,  or  if  they  are  destroyed 
or  wrongfully  withheld,  and  an  account  is  directed  by 
a  court,  every  presumption  will  be  made  against  those 
to  whose  negligence  or  misconduct  the  non- production 
of  proper  accounts  is  due  (t).2  If  all  the  persons  inter- 
ested in  the  account  are  in  pari  delicto,  this  rule  cannot 

(o)  Eowe  v.  Wood,  2  Jac.  &  W.  558.  See,  too,  Goodman  v. 
Whitcomb,  1  ib.  593,  and  3  V.  &  B.  36. 

(p)  See  Taylor  v.  Davis,  3  Beav.  388,  note;  Greatrex  v.  Great- 
rex,  1  De  G.  &  S.  692;  Charlton  v.  Poulter,  ]9  Ves.  148,  note. 

{q)  See  Stuart  v.  Lord  Bute,12Sim.  460;  Taylor  v.  Rundell,l  Ph. 
222,  and  1  Y.  &  C.  C.  C.  128.  This  right  was  not  enforceable  at 
law  even  in  an  action  by  one  partner  against  another,  Ward  v. 
Apprice.  6  Mod.  264. 

(r)  See  Freeman  v.  Fairlie,  3  Mer.  43;  Toulmin  v.  Copland,  3 
Y.  &  C.  Ex.  655. 

(s)  See  Turney  v.  Bayley,  4  De.  G.  J.  &  S.  332. 

(t)  See  Walmsley  v.  Walmsley,  3  Jo.  &  Lat.  556  ;  Grav  v. 
Haigh,  20  Beav.  219. 

1  If  A.,  a  partner,  keep  the  firm  accounts  and  on  final  settle- 
ment claim  that  he  has  omitted  to  credit  himself  with  certain 
amounts  to  which  he  is  entitled,  he  must  furnish  most  conclu- 
sive proof  of  the  existence  of  the  mistake  he  wants  corrected. 
Van  Ness  v.  Van  Ness,  32  N.  J.  Eq.  669  (1880). 

2  Such  a  presumption  does  not  relieve  the  other  side  from  prov- 
ing their  case.  Secondary  evidence  may,  of  course,  be  admitted 
in  such  a  case  ;  aud  if  there  be  any  conflict  of  evidence  the  pre- 
sumption has  weight.     Gage  v.  Parmelee,  87  111.  329  (1877). 


PARTNERSHIP  ACCOUNTS.  479 

be  applied  ; '  but  it  is  the  duty  of  continuing  or  surviv-  Bk.  III. 
ing  partners  so  to  keep  the  accounts  of  the  firm,  as  at  Chap.  8.  Sect. 

any  time  to  show  the  position  of  the  firm  when  a  change  J 

among  its  members  occurred  (u). 


(u)  See  Ex  parte  Toulmin,  1  Mer.  598,  note  ;  Toulmin  v.  Cop- 
land, 3  Y.  &  C.  Ex.  655  ;  and  as  to  losing  all  right  to  interest  by 
keeping  the  accounts  improperly,  see  Boddani  v.  Ryley,  1  Bro.  C. 
C.  239,  and  2  ib.  2  ;  and  4  Bro.  P.  C.  561,  noticed  ante,  p.  392. 

1  In  such  a  case  the  court  may  refuse  to  interfere.  In  Vermil- 
lion v.  Bailey,  27  111.  230  (1862)  the  bill  was  dismissed  and  the 
costs  divided.     See  Hall  v.  Clagett,  48  Md.  223  (1877). 


4S0  PARTNERSHIP  ARTICLES. 


[*406]  ^CHAPTER  IX. 

OF  PARTNERSHIP  ARTICLES. 

Section  I. — General  Observations. 

The  rights  and  obligations  of  partners  inter  se,  are 
generally,  to  a  certain  extent,  regulated  by  special 
agreement,  the  true  meaning  of  which  is  to  be  ascer- 
tained by  the  ordinary  rules  of  construction  (a). 

In   considering  the  effect,   however,   of  partnership 
articles,   the  following  principles  are   to  be    borne    in 
mind: — 
Bk  jjj  1.   In  the  first  place,  partnership  articles  are  not  in- 

Chap.  9.  Sect,  tended  to  define,  and  are  not  construed  as  defining  all 
1-  the  rights  and  obligations  of  the  partners  inter  se.     A 

Partnership  great  deal  is  left  to  be  understood.  The  maxim  expres- 
articles  are  sum  facit  cessare  taciturn  naturally  applies  to  partner- 
not  intended  ship  articles  as  to  other  agreements;  but  the  rights  and 
to  define  all  obligations  of  partners,  so  far  as  they  are  not  expressly 
and  duties  of  declared,  are  determined  by  general  principles,  which 
partners.  are  always  applicable  where  not  clearly  excluded.  In 
the  language  of  Lord  Langdale,  in  Smith  v.  Jeyes  (b). 


Smith  v. 


"The  transactions  of  partners  with  each  other  cannot  be  con- 
jeyes  sidered  merely  with  reference  to  the  express  contract  between 

them.  The  duties  and  obligations  arising  from  the  relation  be- 
tween the  parties  are  regulated  by  the  express  contract  between 
them,  so  far  as  the  express  contract  extends  and  continues  in 
force  ;  but  if  the  express  contract,  or  so  much  of  it  as  continues 
in  force,  does  not  reach  to  all  those  duties  and  obligations,  they 
are  implied  and  enforced  by  the  law  ;  and  it  is  often  matter  to 
be  collected  and  inferred  from  the  conduct  and  practice  of  the 
parties,  whether  they  have  held  themselves,  or  ought  or  ought 
T  *  4071  not  to  ^e  held,  bound  by  the  particular  *  provisions  contained  in 

their  express  agreement.      When  it  is  insisted  that  the  conduct 

(a)  See  Chapter  X.  of  Story  on  Part.  ;  Collyer  on  Part.  137,  &c. 
See,  also,  the  head  Partnership  in  Jarman  and  Bythewood's 
Convevancing  and  Davidson's  Conveyancing. 

[b)  4  Beav.  505.  See,  too,  Nelson  v.  Bealby,  30  Beav.  472,  and 
Browning  v.  Browning,  31  Beav.  316,  as  to  the  non-application 
of  the  maxim  expressio  unius  est  exclusio  altcrius. 


GENERAL  RULES  OF  CONSTRUCTION.  481 

of  one  partner  entitles  the  other  to  a  dissolution,  we  must  con-  Bk.  III. 
sider  not  merely  the  specific  terms  of  the  express  contract,  but  Chap.  9.  Sect. 

also  the  duties  and  obligations  which  are  implied  in  every  part-  _J 

nership  contract  "  (c).1 

2.  The  attainment  of  the  objects  which  the  partners  Articles  to 
have  declared  they  had  in  view  is  always  regarded  as  of  be  construed 
the  first  importance.     All  the  provisions  of  the  articles  Wltn  relel- 
are  to  be  construed  so  as  to  advance   and   not  to  defeat  0biectsof & 
those  objects  ;    and   however  general   the    language  of  the  partners, 
partnership  articles  may  be,  they  will  be  construed  with 
reference  to  the  end  designed,  and,   if  necessary,  re- 
ceive a  restrictive  interpretation  accordingly  (d).    This 

rule  is  of  especial  importance  in  considering  the  limits 
of  general  powers  conferred  on  committees,  directors, 
and  others.  For  example,  in  Chappie  v.  Cadell  (e)  the  Chappie  v. 
proprietors  of  a  newspaper  entrusted  the  management  Cadell. 
of  the  paper  to  a  committee  of  five,  and  gave  them 
power  to  call  general  meetings,  and  agreed  that  the 
resolutions  of  the  majority  present  at  such  meetings 
should  be  binding  on  all  the  proprietors.  A  meeting 
was  convened,  and  the  majority  present  resolved  that 
the  paper  and  the  shares  of  all  the  proprietors  in  it 
should  be  sold  by  auction.  But  it  was  held  that  the 
majority  had  no  power  to  sell  the  shares  of  a  dissent- 
ient and  protesting  minority. 

Other  illustrations  of  the  same  principle  will  be 
found  in  Bk.  III.,  c.  2,  §  3,  which  treats  of  the  powers 
of  majorities. 

Conformably  with  the  same  rule, 

3.  Any   provision,  however  worded,  will,  if   possible,  Articles  to  be 
be  construed  so  as  to  defeat  any  attempt  by  one  part-  construed  so 
ner  to  avail  himself  of  it  for  the  purpose  of  defrauding  ^s  to  defeat 
his  co-partner.      Thus   it   is  very  common  for  partners  ' 

to  agree  that  half-yearly  accounts  shall  be  made  out 
and  signed,  and  not  be  afterwards  disputed  ;  but,  not- 
withstanding such  a  clause,  if  one  partner  knowingly 
makes  out  a  false  account,  and  his  co-partners  sign  it 
upon  the  faith  that  it  is  correct,  they  will  not  be  bound 

(e)  See,  too,  Blisset  v.  Daniel,  10  Ha.  522. 
i  d  I  See  Coll.  on  Part.  137. 
(e)  Jac.  537. 


1  The  agreement  in  the  written  articles  of  partnership  that  A. 
shall  pay  his  contribution  as  soon  as  needed  cannot  he  shown  by 
parol  to  mean  that  the  money  shall  not  be  paid  till  B.  pays  his 
share.  Reiter  v.  Morton.  96  Pa.  St.  229  (1880).  The  rules  as  to 
the  variance  or  contradiction  of  partnership  articles  are  the  same 
as  those  applicable  to  other  written  instruments. 
*  8  LAW   OF   PARTNERSHIP. 


482 


PARTNERSHIP  ARTICLES. 


Bk.  III. 
Chap.  9.  Sect. 
1. 

[  *  408] 


and  the  tak- 
ing of  unfair 
advantages. 


Provisions 
may  be 
waived  by 
tacit  agree- 
ment. 


by  it  (/).  Again,  it  is  by  no  means  unusual  for  part- 
ners to  agree  that  yearly  accounts  shall  be  taken,  and 
that,  in  the  case  of  the  death  of  a  partner,  his  repre- 
sentatives shall  be  paid  his  share  *  as  appearing  in  the 
last  account,  with  interest  instead  of  subsequent  profits  ; 
but  if  the  partners  do  not  for  several  years  make  out 
any  accounts,  and  then  one  of  them  dies,  the  survivors 
are  not  entitled  to  act  on  the  letter  of  the  agreement, 
and  pay  only  the  amount  which  in  the  last  account 
was  carried  to  the  credit  of  the  deceased,  with  interest 
on  such  amount  (g). 

4.  Every  power  conferred  by  the  articles  on  any  in- 
dividual partner,  or  on  any  number  of  partners,  is 
deemed  to  be  conferred  with  a  view  to  the  benefit  of 
the  whole  concern  ;  and  an  abuse  of  such  power,  by  an 
exercise  of  it,  warranted  perhaps  by  the  words  confer- 
ring it,  but  not  by  the  truth  and  honour  of  the  articles, 
will  not  be  countenanced.  Thus,  in  a  case  which  has 
been  already  frequently  referred  to  (h),  a  power  to 
expel  any  partner  was  vested  in  the  holders  of  two- 
thirds  of  the  shares  in  the  firm  ;  but  it  was  held  that, 
although  this  power  was  so  framed  that  it  might  be 
exercised  without  any  reason  being  assigned,  it  could 
not  be  put  in  force  for  the  unfair  purpose  of  obtaining 
the  share  of  the  expelled  partner  at  less  than  its  value. 

5.  Any  article,  however  express,  is  capable  of  being 
abandoned  by  the  consent  of  all  the  partners  ;  and  this 
consent  may  be  evidenced,  not  only  by  express  words, 
but  by  conduct  (i).1 

The  maxim  modus  et  conventio  vincunt  legem  is  espe- 
cially applicable  to  cases  of  this  description.  In  the 
language  of  Lord  Eldon, 

"In  ordinary  partnerships  nothing  is  more  clear  than  this, 
that,  although  partners  enter  into  a  written  agreement,  stating 
the  terms  upon  which  the  joint  concern  is  to  be  carried  on,  yet 
if  there  be  a  long  course  of  dealing,  or  a  course  of  dealing  not 
long,  but  still  so  long  as  to  demonstrate  that  they  have  all  agreed 
to  change  the  terms  of  the  original  written  agreement,  they  may 
be  held  to  have  changed  those  terms  by  conduct.  For  instance, 
if  in   a  common   partnership  the  parties  agree  that  no  one  of 

(/)  See  Oldaker  v.  Lavender,  6  Sim.  239. 

(g)  Pettyt  v.  Janeson,  6  Madd.  146. 

(h)  Blisset  v.  Daniel,  10  Ha.  493.  See,  also,  Wood  v.  Wood,  Y. 
E.  9  Ex.  190. 

(?)  This  rule  appears  to  be  of  comparatively  modern  date  ;  it 
was  not  acted  on  in  Smith  v.  The  Duke  of  Chandos,  Barn.  419. 


1  Thomas  v.  Lines.  83  N.  Ca.  191  (1880);  Henry  v.  Jackson,  37 
Vt.  431  (1865);  Bobbins  v.  Laswell,  27  111.  365  (1862). 


GENERAL  RULES  OF  CONSTRUCTION.  483 

them  shall  draw  or  accept  bills  of  exchange  in  his  own  name,  Bk.  III. 
without  the  concurrence  of  all  the  others,  yet,  if  they  afterwards  Chap.  9.  Sect. 

slide  into  a  habit  of  permitting  one  of  them  to  draw  or  accept 

bills  without  the  concurrence  of  the  others,  this*  Court  will  hold  [  *  4()(Jl 
that  they  have  varied  the  terms  of  the  original  agreement  in  that 
respect "  (k). 

This  principle  was  acted  on  by  Lord  Eldon  in  a  case  Examples. ] 
where  the  partners  had  agreed  that  annual  accounts 
should  be  taken,  and  that  in  case  of  the  death  of  a 
partner,  his  representatives  should  be  paid  an  allowance 
instead  of  profits  ;  for  it  appeared  that  for  some  years 
no  accounts  had  been  taken,  and  that  the  partners  had 
engaged  in  transactions  of  such  a  nature,  that  it  would 
have  been  unfair  to  have  applied  the  original  agree- 
ment (I).  So  a  practice  treating  losses  as  bad  when 
discovered  so  to  be,  was  held  to  apply  as  between  the 
executors  of  a  deceased  partner  and  the  surviving  part- 
ners, although  the  effect  was  to  give  the  executors  much 
more  than  they  would  otherwise  have  been  entitled 
to  (m).  S  j,  where  articles  contained  a  stipulation  that 
the  partners  should  contribute  to  losses  and  share 
profits  in  a  certain  proportion,  and  it  appeared  that  a 
person  who  managed  the  affairs  of  the  firm  had  al- 
ways received  a  share  of  the  profits,  but  had  never 
been  called  upon  to  contribute  to  losses,  it  was  held, 
that  assuming  him  to  be  a  partner  in  the  proper  sense 
of  the  term,  and  to  have  been  originally  bound  by  the 
articles  to  contribute  to  losses,  the  articles,  so  far  as 
they  obliged  him  so  to  contribute,  had  been  varied  by 
the  conduct  of  the  parties,  and  were  no  longer  binding 
on  him  (n).J 


(k)  Const  v.  Harris,  T.  &  E.  523.  See,  also,  Coventry  v. 
Barclay,  33  Beav.  1,  and  on  app.  3  De  G.  J.  &  Sm.  320  ;  Pilling 
v.  Pilling,  3  De  G.  J.  &  Sm.  162  ;  England  v.  Curling,  8  Beav. 
133  and  137  ;  Somes  v.  Currie,  1  K.  &  J.  605,  and  the  cases  in 
the  next  three  notes. 

(1)  See  Jackson  v.  Sedgwick,  1  Swanst.  460;  Petty t  v  Janeson. 
6  Madd.  146;  Simmons  v.  Leonard,  3  Ha.  58*1.  Compare 
Lawes  v.  Lawes,  9  Ch.  D.  98,  where  the  day  for  making  up  ac- 
counts had  been  altered. 

(m)  Ex  parte  Barber,  5  Ch.  687. 

(»)  Geddes  v.  Wallace,  2  Bli.  270. 


1  In  Gage  v.  Parmelee,  87  111.  329  (1877),  A.,  the  active  partner, 
was  to  receive  a  yearly  salary  of  $1000.  The  firm's  business 
enormously  increased  and  the  membership  of  the  firm  was 
changed.  Salary  was  credited  A.  on  the  books  at  $5000  per 
annum.  The  court  refused  to  interfere  with  a  settlement  made 
on  that  basis.  See  also  Thrall  v.  Seward,  37  Vt.  573  (1865)  :  and 
Dow  v.  Moore,  47  N.  H.  419  (1867). 


484 


PARTNERSHIP  ARTICLES. 


Bk.  III. 
Chap.  9.  Sect. 
J. 

Varying 
articles. 


[  *  410] 


Reverting  to 

original 

rules. 


Original 
articles 
apply  to 
partnership 
continued 
under  them. 


King  v. 

Chuck. 


Provisions 
applicable 
during  the 


It  is  proposed  to  make  an  alteration  in  the  articles 
by  an  agreement  which  shall  be  binding  on  all  parties, 
notice  of  the  proposed  change  and  of  the  time  and 
place  at  which  it  is  to  be  taken  into  consideration, 
ought  to  be  given  to  all  partners  (o).1  For,  even  if 
the  change  is  one  which  it  is  competent  for  a  majority 
to  make  against  the  assent  of  the  minority,  all  are 
*  entitled  to  be  heard  upon  the  subject  ;  and  unless  all 
have  an  opportunity  of  opposing  the  change,  those 
who  object  to  it  will  not  be  bound  by  the  others  (p). 

It  seems  that  a  person  who  comes  into  a  firm  through 
another  who  has  acquiesced  in  a  variation  of  the  terms 
of  the  partnership  articles,  is  bound  by  that  acquies- 
cence, and  cannot  revert  to  the  original  articles  (q)  ; 
and  this  principle  has  been  applied  to   companies   (r). 

6.  The  last  general  rule  which  it  is  necessary  to 
notice  is  this  :  if  a  partnership,  originally  entered  into 
for  a  definite  time,  is  continued  after  the  expiration  of 
that  time,  without  any  new  agreement,  the  articles 
under  which  the  partnership  was  first  carried  on  con- 
tinue, so  far  as  tuey  are  applicable  to  a  partnership  at 
will  to  regulate  the  rights  and  obligations  of  the  part- 
ners inter  se  (s).  Thus,  in  King  v.  Chuck  (t),  three 
partners,  A.,  B.,  C,  agreed  that  if  either  of  them  should 
die,  his  capital,  as  appearing  by  the  last  account,  should 
be  paid  to  his  representatives  by  the  surviving  partners, 
on  whom  the  trade  was  then  to  devolve.  A.  died,  and 
this  agreement  was  acted  on,  and  B.  and  C.  continued 
in  partnership  without  coming  to  any  fresh  agreement. 
Then  B.  died,  and  it  was  held  that  B.  and  C.  had  in 
fact  continued  in  partnership  on  the  old  terms,  and  that 
B.'s  executors  were  therefore  to  be  paid  the  amount  ap- 
pearing to  be  his  capital  in  the  last  account  come  to  be- 
tween him  and  C.2 

Even  where  a  partnership  is  entered  into  for  a  term 
of  years,  and  the  articles  provide  for  events  happening 

(o)  See  Const  v.  Harris,  T.  &  R.  524. 

(p)  lb.  525;    see,  also,  ib.  518. 

(j)  See  Const  v.  Harris,  T.  &  R.  524. 

(r)  Ffooks  v.  South-Western  Rail.  Co.,  1  Sm.  &  G.  142;  Peek 
v.  Gurney.  13  Eq.  79. 

(s)  See  Neilson  v.  Mossend  Iron  Co.,  11  App.  Ca.  298,  where  a 
new  agreement  was  contemplated,  but  not  concluded:  Crawshay 
v.  Collins,  15  Ves.  228;  Featherstonhaugh  v.  Fenwick,  17  Yes. 
307;  Booth  v.  Parkes,  1  Molloy,  465. 

(0  17  Beav.  325. 


1  Thomas  v.  Lines,  83  N.  Ca.  191  (1880). 

2  See  Sangston  v.  Hack,  52  Ind.  173  (1875);  U.  S.  Bank  v.  Bin- 
ney,  5  Mason,  176  (1828);  Mifflin  v.  Smith.  17  S.  &  R.  165  (1828). 


ARTICLES  APPLYING  TO  FRESH  PARTNERSHIP.  485 

during  the  term  or  during  the  partnership,  the   above  Bk.  III. 
rule  has  been  still  applied.     Thus,  where  two  persons  Chap. !).  Sect 

agreed  to  become  partners  for  fourteen  years,  and  stip-  J 

ulated  that   if  either   died   during  this  co-partnership  term  of  part- 
term,  his  share  should  be  taken  by  the  other  at  a  cer-  nersmP- 
tain  sum,  and  the  fourteen  years  expired,  and  the  two 
persons  continued  in  partnership  together  without  com- 
ing to  *  any  fresh  agreement,  and  then  one  of  them  [*411] 
died  :  it  was  held  that  the  above  stipulation  was  bind- 
ing, and  that  the  share  of  the  decased  belonged  to  the 
survivor  upon  payment  of  the  sum  mentioned  (u).   The 
expression,  "the  partnership  term,"  was  held  equiva- 
lent to  the  time  during  which  the  partners  continue  in 
partnership  without  coming  to  any  fresh  agreement. 

But  the  authorities  on  this  head  are  not  uniform  (x). 
In  their  present  state  it  is  doubtful  whether  a  clause 
giving  a  right  of  pre-emption  is  one  of  those  which  is 
operative  after  the  termination  of  the  partnership 
originally  contemplated,  unless  the  articles  are  clear 
upon  the  subject  (y).  A  right  of  expulsion  has  been 
held  not  to  apply  to  a  partnership  continued  after  the 
expiration  of  the  time  for  which  it  was  originally  en- 
tered into  (z).  But  an  arbitration  clause  has  been  held 
to  apply  (a).1 


Section  II. — Ox    the    Usual    Clauses   in  Aeticles  of 
Partnership. 

Having  now  alluded  to  the  more   important  general  Usual  clauses 
rules  which  require  to  be  borne  in  mind  in  considering  in  partner- 
the  effect  of  special  agreements  between  partners,  it  is  smP  articles, 
proposed  to  notice  shortly  the  provisions  usually  met 
with    in    partnership    articles,   and    the   interpretation 
which  has  been  put  upon  them  by  the  courts. 

(m)  Essex  v.  Essex,  20  Beav.  442;  Cox  v.  "VVilloughbv,  13  Ch. 
D.  863. 

(x)  Compare  the  two  last  cases  with  Yates  v.  Firm,  13  Ch.  D. 
839,  and  Cookson  r.  Cookson,  8  Sim.  529. 

(,»/>  See  the  two  last  notes.  Yates  v.  Finn  was  not  referred  to 
in  WUloughby  ».  Cox,  but  the  former  case  is  very  shortly  reported 
on  this  point. 

(z)  Clark  ».  Leach,  32  Beav.  14,  and  1  De  G.  J.  &  Sm.  409. 
See  Neilson  v.  Mossend  Ir^on  Co..  11  App.  Ca.  298. 

(a)  Gillett  v.  Thornton,  19  Eq.  599. 

1  If  articles  provide  that  in  case  one  partner  wishes  to  retire 
he  must  give  notice  of  his  intention  a  certain  time  ahead  after 
the  expiration  of  the  term  of  the  partnership  it  has  been  held 
that  this  provision  is  no  longer  binding.  Duffield  v.  Brainerd, 
45  Conn.  424  (1878);  Wilson  dl  Simpson,  89  N.  Y.  619  (1882). 


4SG 


PARTNERSHIP  ARTICLES. 


Bk.  III. 

Chap.  9.  Sect. 


[*412] 


1.  Nature 
and  place  ot 
business. 


Place  of 
business. 


2.  Com- 
mencement 
of  the  part- 
nership. 


Retrospec- 
tive and  pro- 
spective 
partnership. 


In  framing  articles  of  partnership,  it  should  always 
be  remembered,  that  they  are  intended  for  the  guidance 
of  persons  who  are  not  lawyers;  and  that  it  is  therefore 
unwise  to  insert  only  such  provisions  as  are  necessary 
to  exclude  the  application  of  rules  which  apply  where 
nothing  to  the  contrary  is  said.  The  articles  should  be 
so  drawn  as  to  be  a  code  of  directions,  *  to  which  the 
partners  may  refer  as  a  guide  in  all  their  transactions, 
and  upon  which  they  may  settle  among  themselves  dif- 
ferences which  may  arise,  without  having  recourse  in 
Courts  of  Justice. 

1.  The  nature  of  the  business,  should  always  be  stated. 
Upon  it  depends  the  extent  to  which  each  partner  is  to 
be  regarded  as  the  implied  agent  of  the  firm  in  his 
dealings  with  strangers;  and  upon  it  also  in  a  great 
measure  depends  the  power  of  a  majority  of  partners 
to  act  in  opposition  to  the  wishes  of  the  minority  (b). 

The  place  of  business,  should  also  be  stated;  and 
if  the  place  is  held  on  lease  which  will  expire  during 
the  partnership,  provision  should  be  made  for  the  re- 
newal of  the  lease,  or  for  the  acquisition  of  another 
place  of  business.  Otherwise  the  business  may  come 
to  a  premature  end  (c). 

2.  The  time  of  the  commencement  of  a  partnership. — 
Prima  facie,  articles  of  partnership,  like  other  instru- 
ments, take  effect  from  their  date;  and  if  they  are  ex- 
ecuted on  the  day  of  their  date,  and  contain  no  expres- 
sion indicating  when  the  partnership  is  to  begin,  it  must 
be  taken  to  commence  on  the  day  of  the  date  of  the 
articles,  and  parol  evidence  to  show  that  this  was  not 
intended  is  not  admissible  (d). 

It  occasionally  happens  that  it  is  expressly  declared 
by  the  partnership  articles  that  the  partnership  is  to 
date  from  a  specified  time,  either  prior  or  subsequent 
to  the  day  on  which  the  articles  are  executed.  The 
effects  of  such  a  declaration,  as  between  the  parties  to 
the  articles,  and  as  between  them  on  the  one  hand,  and 
third  persons  on  the  other,  are  by  no  means  the  same. 
As  between  the  parties  themselves  the  time  specified  is 
that  from  which  the  accounts  of  profits  and  losses  are 
to  date;  but  as  between  those  parties  and  third  persons 

(b)  See  ante,  p.  313,  ct  scq.  « 

(c)  See  Clements  v.  Norris.  8  Ch.  D.  129,  where  the  business 
was  to  be  carried  on  at  a  particular  place,  or  such  other  place  as 
the  partners  might  agree  upon,  and  they  disagreed. 

(d)  Williams  v.  Jones,  5  B.  &  C.  108.  If  the  articles  arc  not 
dated,  parol  evidence  is  admissible  to  show  that  they  were  not  to 
take  effect  from  the  time  of  their  execution.  Sec  Davis  c.  Jones, 
17  C.  B.  625. 


USUAL  CLAUSES.  487 

the  time  in  question  is  of  little  if  any  importance;  for  Bk.  III. 

an  agreement  that  a  partnership  shall  date  from  a  time  Chap.  9.  Sect. 

past  does  not  *  enure  to  the  benefit  of  creditors  (e);  J 

and  an  agreement  that  it  shall  date  from  a  time  future  [  *41o] 
does  not  prejudice  them,  if,  in  fact,  the  parties  act  as 
partners  before  such  time  arrives  ( /  ) 

It  occasionally  happens  that  an  agreement  for  a  part-  Formal  con- 
nership  is  drawn  up  and  signed,  but  a  more  formal  in-  tract  to  be 
strument  is  intended  to  be  executed.     If  in  a  case  of  drawn  UP- 
this  sort  the  execution  of  the  formal  instrument  is  de- 
layed, the  commencement  of  the  partnership  is  not  nec- 
essarily delayed  also.     "Whether  it  is  or  is  not  must  de- 
pend on  the  terms  of  the  preliminary  agreement;   for  by 
that  agreement  the  parties  are  bound,  and  its  terms  will 
regulate  their  rights  and  obligations  'inter  se,  so  long 
as  the  more  formal  instrument  is  unexecuted  (g). 

3.  The  name  or  style  of  the  firm,  should  be  express-  3  The  style 
ed;  and  it  should  be  declared  that  no  partner  shall  en-  of  the  firm. 
ter  into  an  engagement  on  behalf  of  the  firm  except  in 

its  name.  Such  an  agreement  is  capable  of  being  en- 
forced (h) ;  and  it  may  be  of  use  in  determining,  as  be- 
tween the  partners,  whether  a  given  transaction  is  to 
be  regarded  as  a  partnership  transaction  or  not. 

4.  The  duration   of   the   partnership. — If    the  time  4.  The  dura- 
for  which  the  partnership  is  to  endure  is  not  limited  to  ti°n  oi  tne 

a  definite  period,  either  expressly  or  by  necessary  im-  PartnersniP- 
plication,  the  partnership  may  be  dissolved  at  the  will 
of  any  partner  (*).  But  it  must  not  be  forgotten  that 
a  partnership  entered  into  for  a  definite  time  is  dis- 
solved by  the  death  or  bankruptcy  of  any  one  of  its 
members  before  that  time  has  expired  (A:),  and  that  it 
is  therefore  necessary  to  provide  for  these  events  in  or- 
der to  give  effect  to  the  agreement  as  to  time.1 

A  partnership  entered  into  for  a  certain  time,  and 
continued  after  that  time  has  expired,  is  a  partnership 
at  will  (I). 

5.  The  premium. — The  points  to  be  attended  to  with  5.  The 

. premium. 

(e)  Vere  v.  Ashbv,  10  B.  &  C.  288. 
(/)  Battley  v.  Lewis.  1  Man.  &  Gr.  155. 
(g)  See  England  v.  Curling,  8  Bear.  133. 
(h)  See  Marshall  v.  Column,  2  J.  &  W.  268. 
(i)  Infra,  book  iv.  ch  1,  \  1. 
(k)  Ibid. 

(/1  Featherstonhaugh  v.  Fenwiek,  17  Ves.  307;  Neilson  v. 
Mossend  Iron  Co.,  11  App.  Ca.  298,  and  infra,  book  iv.  ch.  1,  §  1. 

1  The  courts  will  enforce  a  provision  that  in  the  event  of  the 
death  of  one  partner,  the  partnership  shall  nevertheless  continue, 
but  it  must  be  clearly  proved  and  carried  out.  Alexander  v. 
Lewis,  47  Texas,  481  (1877). 


488 


PARTNERSHIP  ARTICLES. 


Bk.  III. 

Chap.  9.  Sect. 
2. 

[  *  414] 

6.  The 
capital  and 
property  of 
the  firm. 


reference  to  this,  are,  1,  when,  to  whom,  and  how  it  is 
to  be  paid;  and,  2,  whether  the  whole  or  any  part  of  it 
is  to  be  returned  in  *  any  and  what  events.  The  law 
relating  to  this  subject  has  been  already  noticed  (m). 

6.  The  capital  and  property  of  the  firm.— The  ar- 
ticles should  always  carefully  specify  what  is  and  what 
is  not  to  be  considered  partnership  property;  particu- 
larly where  one  partner  is,  or  is  to  be,  solely  entitled 
to  what  is  to  be  used  for  the  common  purposes  of  all. 
If  one  partner  is  entitled  to  land  which  is  to  become 
partnership  property,  it  is  usual  (in  order  to  prevent  a 
Bale  to  a  person  for  value  without  notice),  to  have  that 
land  conveyed  or  assigned  to  trustees  for  the  firm;  but, 
as  between  the  partners  themselves,  all  that  is  requi- 
site is  to  declare  in  the  articles  that  the  land  shall 
form  part  of  the  assets  of  the  firm.  It  is  also  prudent 
to  declare  that,  as  between  the  real  and  personal  rep- 
resentatives of  any  deceased  partner,  his  share  shall  be 
deemed  personal  estate.  It  should  be  declared  that 
apprentice  fees  and  other  casual  payments  belong  to 
the  firm,  and  form  part  of  its  profits. 

If  the  firm  is  to  spend  money  on  the  separate  prop- 
erty of  one  of  the  partners,  the  right  of  the  firm  to  a 
lien  for  its  outlay  should  be  expressly  stipulated  for 
or  expressly  excluded  (n). 

A  kind  of  property  which  is  difficult  to  deal  with, 
and  which  should  always  be  made  the  subject  of  an  ex- 
press agreement,  is  the  benefit  accruing  from  an  office 
or  appointment  obtained  by  one  of  the  partners.  For 
example,  in  the  case  of  a  firm  of  solicitors,  one  of  them 
may  be  a  clerk  to  some  turnpike  trust,  or  to  a  poor  law 
board,  or  he  may  hold  some  other  appointment  yield- 
ing a  salary.  Care  should  always  be  taken  to  specify 
whether  the  salary  is  to  belong  solely  to  the  partner 
holding  the  appointment,  or  whether  it  is  to  form  part 
of  the  partnership  assets  (o);  and  if  the  latter,  provi- 
sion should  be  made  for  the  payment  of  a  sum  by  the 
partner  holding  the  appointment  in  the  event  of  the 
dissolution  of  the  firm,  whilst  the  appointment  contin- 
[  *415]  nes.  If  the  profits  of  the  office  are  *  partnership  as- 
sets, and  the  firm  is  dissolved  whilst  the  office  is  held 
by  one  of  its  members,  the  Court,  in  winding  up  the 
partnership,  will  leave  him   in  the   enjoyment  of  the 


Official  ap- 
pointments. 


(m)  Ante,  p.  64,  et  seq. 

(n)  Ante,  pp.  330  and  384. 

(o)  See  Collins  v.  Jackson,  31  Beav.  (545,  noticed  ante,  p.  331. 
where  profits  arising  from  appointments  of  this  sort  were  held  to 
belong  to  the  partnership,  although  primd  facie  they  do  not. 


USUAL  CLAUSES.  489 

office,  but  charge  him  with  its  value  in  his  account  with  Bk.  III. 
the  firm  (p).  Chap.  9.  Sect. 

When  a  partnership  is  formed  for  working  some  se-  J 

cret  and  unpatented  invention,  the  articles  should  spec-  Trade 
ify  to  whom  exclusively  the  right  of  working   such  in-  secrets> 
vention  shall  belong  in  the  event  of  dissolution.     For  pa  eu  s'      ' 
if  there  be  no  agreement  on  the  subject,  all  the  parties 
will  have  a  right  to  work  it,  in  opposition  to  each  other, 
there  being  no  ground  upon  which  any  of  them  can  be 
prevented  from  so  doing.     If,  however,  it  can  be  proved 
by  the  inventor  that  his  secret  was  to  be  kept  from  his 
co-partners,  or  that  they,  if  they  discovered  it,  were  not 
to  make  use  of  their  discovery,  they  will  not  be  allowed 
to  violate  the  agreement  into  which  they  have  entered, 
or  the  trust  reposed  in  them;  and  the  circumstance  that 
the  invention  has  not  been  patented  will   not  be  mate- 
rial (q). 

Good-tvill  is  a  kind  of  property  which  ought   also  to  Good-will, 
be  expressly  provided  for;  but  this  is  most  conveniently 
done  in  connection  with  the  dissolution  clauses  (r). 

The  proportions  in  which  the  capital  is  to  be  contrib-  Contribu- 
uted  by  the  partners,  and  the  proportions  in  which  they  tions  of 
are  to  be  entitled  to  it  when  contributed,  ought  also  to  capital, 
be  carefully  expressed.     It  by  no   means   follows  that 
the  partners  are  to  be  entitled  to  the  assets  in  the  pro- 
portions in  which  they  contribute  to  the  capital.     In- 
deed, if  no  express  declaration  upon  the  subject  is  made, 
the  prima  facie  inference  is,  that  all  the  partners   are 
entitled  to  share  the  assets  (minus  the  capital)  equally, 
although  they  may  have  contributed  to  the  capital  un- 
equally (s). 

The  capital  should  be  expressed  to  be  so  much  money ;  Capital 
and  if  one  of   the   partners   is  to   contribute   lands  or  should  be 
goods  instead  of  money,  such  lands  or  goods  should  have  money, 
a  value  set  upon  them,  and  their  value  in  money  should 
be  considered  as  his  contribution.      If  this  be  not  done, 
the  articles  and  accounts  *and  the  proportions  in  which  [  *  416] 
profits  and  losses  are  to  be  shared  will  be  less  perspic- 
uous and  free  from  doubt  than   will   otherwise  be  the 
case;  and  the  partner  who  contributes  land  will  gener- 
ally be  inclined,  to  look  upon  such  land  as  his,  and  not 
as  part  of  the  common  stock. 

When  the   articles   provide   that    each  partner   shall  Rules  as  to 

bring  in   so   much  capital,  or  do  some  other  specified  conditions 
.  . . precedent. 

( p)  See  Smith  v.  Mules,  9  Ha.  556:  Ambler  v.  Bolton,  14  Eq.  427. 

(q)  See  Morison  v.  Moat,  !)  I  la.  241. 

(r)  See  as  to  this,  infra. 

(s)  Ante,  pp.  348,  el  seq.,  and  402-3. 


490  PARTNERSHIP  ARTICLES. 

Bk.  III.  thing,  the  question  sometimes  arises  how  far  the  fulfil- 

Chap.  9.  Sect.  ment  Dy  each  of  his  obligations  is  a  condition  precedent 

to  his  right  to  call  for  fulfilment  by  the  others  of  their 

obligations.  The  rules  laid  down  in  the  well-known 
note  to  Pordage  v.  Cole  (t),  must  be  applied  to  all  such 
cases.     These  rules  are  as  follows: — 

"1.  If  a  day  be  appointed  for  payment  of  money,  or  part  of  it, 
or  for  doing  any  other  act,  and  the  day  is  to  happen,  or  may  hap- 
pen, before  the  thing  which  is  the  consideration  of  the  money  or 
other  act  is  to  he  performed,  an  action  may  be  brought  for  the 
money  or  for  not  doing  such  other  act  before  performance  ;  for  it 
appears  that  the  party  relied  upon  his  remedy,  and  did  not  intend 
to  make  the  performance  a  condition  precedent ;  and  so  it  is  where 
■no  time  is  fixed  for  performance  of  that  which  is  the  consideration 
of  the  money  or  other  act. 

"2.  When  a  day  is  appointed  for  the  payment  of  money,  &c, 
and  the  day  is  to  happen  after  the  thing  which  is  the  considera- 
tion of  the  money.  &c,  is  to  be  performed,  no  action  can  be  main- 
tained for  the  money,  <&c,  before  performance. 

''  3.  Where  a  covenant  goes  only  to  part  of  the  consideration 
on  both  sides,  and  a  breach  of  such  covenant  may  be  paid  for  in 
damages,  it  is  an  independent  covenant,  and  an  action  may  be 
maintained  for  a  breach  of  the  covenant  on  the  part  of  the  defend- 
ant, without  averring  performance  in  the  declaration. 

"  4.  But  where  the  mutual  covenants  go  to  the  whole  considera- 
tion on  both  sides,  they  are  mutual  conditions,  and  the  perform- 
ance must  be  averred. 

"  5.  Where  two  acts  are  to  be  done  at  the  same  time,  as  where 
A.  covenants  to  convey  an  estate  to  B.  on  such  a  day,  and  in  con- 
sideration thereof  B.  covenants  to  pay  a  sum  of  money  on  the 
mme  day,  neither  can  maintain  an  action  without  showing  per- 
formance of,  or  an  offer  to  perform,  his  part,  though  it  is  not  cer- 
tain which  of  them  is  obliged  to  do  the  first  act  ;  and  this  par- 
ticularly applies  to  all  cases  of  sale." 

Stayers  v  ^n  conformity  with  these  rules,  it  was  held,  in  Sta- 

Curling. '  vers  v.  Curling  (u),  that  the  plaintiff  who  had  cove- 
nanted to  proceed  on  a  whaling  voyage,  and  to  obey  the 

[  *  4171  instructions  of  the  *defendants,  but  who  had  not  obeyed 
them,  could  nevertheless  maintain  an  action  against 
them  for  the  share  of  the  profits  which  they  had  cove- 
nanted to  pay  him,  although  they  had  only  covenanted 
to  pay  him  on  the  performance  by  him  of  his  covenants. 

Kemble  v.  So  in  Kemble  v.    Mills  (x),  where   two  persons   had 

(t)  1  Wms.  Saund.  320  a. 
(?<)  3  Bing.  N.  C.  355. 

(.r)  Kemble  v.  Mills.  9Dowl.  446.  Compare  Marsden  v.  Moore, 
4  H.  &  N.  500. 


Mills. 


USUAL  CLAUSES.  491 

agreed   to  become   partners,  and  one  of  them  was  to  Bk.  III. 
bring  in  2000?.,  and   do  certain   things,  and   the   other  Chap.  9.  Sect. 

was  to  bring  in  5000/.,  it  was  held  that  an  action  lay  J 

for  non-payment  of  the  5000/.,  although  the  plaintiff 
did  not  state  that  he  had  brought  in  bis  2000/.,  or  had 
done  any  other  of  the  acts  which  he  had  agreed  to  do. 

Capital  is  sometimes  agreed  to  be  brought  in  in  the  Bringing  in 
shape  of  good  debts.  Where,  on  the  formation  of  a  so  much  in 
partnership,  it  was  agreed  that  one  of  the  partners  §°0(*  deljts. 
should  bring  iu  40,000/.  of  good  debts,  and  that  sum 
was  owing  to  him  by  persons  who  continued  customers 
of  the  firm  after  its  formation,  and  became  indebted 
to  it,  and  who  in  time  paid  it  40,000/.  and  more,  it  was 
held  that  this  sum  had  been  brought  in  as  agreed.  For 
nothing  having  been  said  as  to  the  accounts  on  which 
the  payments  were  made,  and  each  customer's  account 
having  been  kept  in  such  a  way  as  to  form  one  single 
continuous  account,  the  40,000/.  was  treated  as  having 
been  paid  iu  discharge  of  the  earliest  items  in  their  re- 
spective accounts;  or,  in  other  words,  in  discharge  of 
the  debts  owing  to  the  partner  who  undertook  to  bring 
him  that  amount  of  good  debts,  and  not  in  discharge 
of  the  subsequent  debts  contracted  with  the  firm  (y). 

In  Cooke  v.  Benbow,  a  father,  who  was  in  business,  Cooke  v. 
took  his   sons   into   partnership,  and   agreed   to   bring  Benbow. 
into  the  business   all   the   capital,  plant,  and   stock   in 
trade  then  and  usually  employed  by  him    in  the   busi- 
ness.    In  estimating  the  capital,  the  book  debts  due  to 
the  father  were  valued  at  twenty  per  cent,   below  their 
nominal  amount,  but  they,  in  fact,  realized  more;  and 
it  was  held  that  the  surplus  constituted  part  of  *  the  [  *418] 
father's  capital,  and  not  part  of  the  profits  of  the  part- 
nership (z). 

When  a   person  is   about   to  enter  a   firm,  he   some    Guarantee 
times  requires  a  guarantee  that  its  debts  do  not  exceed  against 
a  certain  sum.     If  such   a  guarantee   is  given,  and  it  debts, 
turns  out  that  the  debts  of  the  firm  exceeded  the  sum 
mentioned  at  the  time  in  question,  the  guarantor  is  lia- 
ble to  an  action;  and  the  amount  of  damages  which  the 
plaintiff  is  entitled   to  recover  is   the  loss   he  has   sus- 
tained in  consequence  of  the  excess  of  debts  above  the 
sum  mentioned;  but  not  the  loss  he  may  have  suffered 
by  having  joined  the  firm  (a). 

7.   Interest,  allowances,  &c. — The  allowance  of  inter - 

(y)  Toulmin  v.   Copland,  2  CI.  &  Fin.    681  ;  S.  C,  3  Y.  &  C. 
Ex.  636. 

(z)  Cooke  v.  Benbow,  3  De  G.  J.  &  Sm.   1. 
(a)  Walker  v.  Broadhurst,  8  Ex.  889. 


492 


PARTNERSHIP  ARTICLES. 


Ek.  III. 
Chap.  9.  Sect. 
2. 

7.  Interest, 

allowances, 

&c. 

Monies  to  be 

drawn  out. 


Expenses  to 
be  charged  to 
the  firm. 


8.  Conduct 
and  powers 
of  partners. 


[*419] 


est  on  capital  and  on  advances  should  be  made  the  sub- 
ject of  special  agreement.  The  interest  should  be  made 
payable  before  the  profits  to  be  divided  are  ascertained, 
and  the  interest  on  advances  should  be  made  payable 
before  interest  on  capital  (b). 

Most  articles  of  partnership  contain  a  clause  author- 
izing each  partner  to  draw  out  of  the  partnership  funds 
a  certaim  sum  per  month  for  his  own  private  purposes.1 
Such  a  clause  should  provide  for  the  repayment  with 
interest  of  whatever  may  be  drawn  out  in  excess  of  the 
sum  mentioned. 

The  articles  should  also  specify  what  expenses  are  to 
be  borne  by  the  firm;  and  particular  notice  should  be 
taken  of  allowances  of  an  unusual  kind,  but  which  the 
partners  may  intend  shall  be  made,  e.  g.,  an  allowance 
for  treating  customers,  for  management,  for  rent,  main- 
tenance of  servants,  &c,  &c.  (c). 

8.  Conduct  and  powers  of  the  partners. — It  is  the 
practice  to  insert  in  partnership  articles  an  express 
covenant  by  each  partner  to  be  true  and  just  in  all  his 
dealings  with  the  others.  This,  however,  is  always  im- 
plied; and  the  clause  in  question  is  of  little  use  in  a 
legal  point  of  view,  although  it  may  serve  to  remind 
the  partners  of  their  mutual  obligations  to  good  faith. 

The  effect  of  the  clause  in  creating  a  specialty  debt 
is  very  *  limited.  In  Poicdrell  v.  Jones  (d)  two  part- 
ners covenanted  that  they  respectively  would  be  true 
and  just  to  each  other  in  all  their  contracts,  reckonings, 
receipts,  payments,  and  dealings;  and  each  bound  him- 
self to  the  other  in  the  penal  sum  of  5000Z.  for  the  due 
performance  of  the  covenants  in  the  articles.  One  of 
the  partners  became  greatly  indebted  to  the  firm  in  re- 
spect of  receipts  by  him  on  its  account.  It  was  con- 
tended that  the  debt  was  a  specialty  debt  by  reason  of 
the  covenant  above  referred  to;  but  it  was  held  that 
the  debt  was  only  a  specialty  debt  to  the  extent  of 
5000Z.,  the  amount  of  the  penalty  in  which  each  part- 
ner was  bound  to  the  other,  and  that  the  residue  of  the 
debt  was  a  simple  contract  debt  only. 


(b)  See,  as  to  interest,  when  there  is  no  agreement  to  allow  it, 
ante,  p.  389. 

(c)  Ante,  p.  383. 

(d)  Powdrell  v.  Jones,  2  Sm.  &  G.  305. 

1  A  provision  that  a  partner  shall  be  at  liberty  to  withdraw 
only  so  much  as  may  be  necessary  for  his  private  expenses  has 
been  held  not  to  cover  furniture,  carriages,  plate.  &c. .  but  only 
fainilv  expenses  and  the  cost  of  educating  children.  Stoughton 
v.  Lynch,  1  Johns.  Ch.  467  (1815). 


attention  to 
be  given  to 
affairs  of  the 


USUAL  CLAUSES.  493 

It  is  useful  to  state  "who  is  to  have  the  power  of  hir-  Bk.  III. 
ing  and  dismissing  servants  (e).  Chap.  9.  Sect. 

The  time  and  attention  which  the  partners  are  to  give  Zl 

to  the  affairs  of  the  firm  should  be  expressly  mentioned  ;  Amount  of 

especially  if  one  of  them  is  to  be  at  liberty  to  give  less 

of  his  time  and  attention  than  the  others.1     Inattention 

to  business  by  reason  of  illness  is.  however,  no  breach  m-m. 

of  an  agreement  to  attend  to  it  (/). 

It  is  usual   to  insert   in  partnership  articles  a  clause  stipulations 
prohibiting  any  partner  from  doing  certain  things  with-  that  one 
out  previously  obtaining  the  consent  of  the  others  ;  e.  partner  shall 
g.,  becoming  surety,  releasing  debts,  speculating  in  the  certajn 
funds,  drawing,  accepting,  or  indorsing  bills,  otherwise  things  with- 
than  in  the  usual  course  of  busines,  &c,  &c.  out  the  con- 

An  agreement  not  to  carry  on  any  other  business  is  sent  oi  tue 
binding  and  can   be  enforced  ;  but  a  breach  of  it  does  °    eib' 
not  necessarily  involve  a  liability  to  account  to  the  firm     ^t^cairv 
for  the  profits  derived  from  the   business  carried  on  in  on  any  0tber 
violation  of  the  agreement  (g).  business. 

If  the  number  of  partners  exceeds  two,  the  major-  Majority, 
ity  should  be  expressly  entrusted  with  the  power  of  de- 
ciding what  shall  be  done  as  regards  any  matter  in  dis- 
pute between  the  partners,  and  relating  to  the  business 
of  the  partnership,  as  *  defined  by  the  articles  (h).  L  4_UJ 
It  is  difficult  to  lay  down  a  general  rule  for  the  deter- 
mination of  what  is  to  be  done  if  the  partners  are 
equally  divided.  Articles  of  partnership,  as  usually 
drawn,  are  silent  upon  this  question  ;  but  if  it  were  de- 
clared that  in  such  a  case  matters  should  be  left  in 
statu  quo,  probably  some  little  assistance  would  be 
given  to  the  preservation  of  peace  and  good  will. 

9.   Partnership  books. — In  order  to  prevent  any  dis-  9.  Custody  to 
putes  as  to  the  custody   of   the  partnership  books,  it  is  the  part- 
advisable  to  declare  that  they  shall  be  kept  at  the  office  sllil3  books' 
of  the  partnership,  and  that  each  partner  shall  have 
free  access  to  them.      A  Court  will  restrain  the  removal 

(e)  See  ante  p.  313. 

(/)  Boast  v.  Firth,  L.  R.  4  C.  P.  1  ;  Robinson  v.  Davidson.  L. 
R.  6.  Ex.  269. 

(g)  Dean  v.  Maedowell,  8  Ch.  D.  345,  and  see  ante,  book  iii. 
ch.  2,  I  2. 

(h)  See  as  to  the  powers  of  a  majority,  ante,  p.  313,  et  seq.,  and 
Falkland  v.  Cheney,  5  Bro.  P.  C.  476,  which  turned  on  the  word- 
ing of  the  articles. 


1  In  McFerran  v.  Filbert,  102  Pa.  St.  73  (1883),  it  was  held 
that  where  a  partner  in  a  professional  firm  reserves  the  right  to 
carry  on  any  other  business  and  to  absent  himself  as  he  sees  fit, 
he  can  cease  business  altogether  and  move  away  without  aban- 
doning the  firm. 


494  PARTNERSHIP  ARTICLES. 

Bk.  III.  or  detention  of  the  partnership   books  contrary  to  an 

Lnap.  J.  oect.  express  agreement  entered  into  by  the  partners  (i) ;  aDd 

J even  in  the  absence  of  any  special  agreement,  the  Court 

will  probably  interfere,  for  it  is  an  implied  obligation 
on  the  part  of  every  partner  not  to  exclude  his  co-part- 
ners from  access  to  the  books  of  the  firm  (k). 
10.  Accounts       10-   Accounts. — The  object  of  taking  partnership  ac- 
to  be  kept       counts  is  two-fold,  viz.,  1.   To  show  how  the  firm  stands 
and  taken.      as  regards  strangers  ;  and  2.   To  show  how  each  part- 
ner stands  towards  the  firm.     The  accounts,  therefore, 
which  the  articles  should  require  to   be  taken,   should 
be  such  as  will  accomplish  this  two-fold  object.       The 
articles  should  consequently  provide,  not  only  for  the 
keeping  of  proper  books  of   account,  and   for   the  due 
entry  therein  of  all  receipts  and  payments,  but  also  for 
the  making  up  yearly  of  a  general  account,  showing  the 
then  assets  and  liabilities  of  the  firm,  and  what  is   due 
to  each  partner  in  respect  of  his  capital   and  share  of 
profits,  or  what  is  due  from  him  to  the  firm,  as  the  case 
may  be. 
Accounts  In  order,  moreover,  to  prevent  accounts  which  have 

agreed  to  not  been  once  fairly  taken  and  settled  from  being  after- 
to  be  re-  wards  disputed,  tbe  articles  usually  declare  that  an  ac- 
openea.  count  when  signed  shall  be  treated  as   conclusive  ;  or 

[  *  421]  not  be  opened  except  for  some  *  manifest  error  discov- 
ered within  a  given  time.  A  provision  to  this  effect  is 
extremely  useful,  and  should  never  be  omitted  (/);  but 
however  stringently  it  may  be  drawn,  no  account  will 
be  binding  on  any  partner  who  may  have  been  induced 
to  sign  it  by  false  and  fraudulent  representations,  or  in 
ignorance  of  material  circumstances,  dishonorably  con- 
cealed from  him  by  his  co-partners  (m).  Where,  how- 
ever, all  parlies  act  bona  fide  such  clauses  are  opera- 
tive; but  the  usual  provision  as  to  manifest  errors  ap- 
plies only  to  errors  in  figures  and  obvious  blunders,  not 
to  errors  in  judgment,  e.  g.,  in  treating  as  good,  debts 
which  ultimately  turn  out  to  be  bad,  or  in  omitting 
losses  not  known  to  have  occurred  (n).     All  errors  are 

(i)  See  Taylor  v.  Davis,  3  Beav,388,  note  ;  Greatrex  v.  Great- 
rex,  1  De.  G.  &..Sm.  692. 

(k)  In  Greatrex  v.  Greatrex,  1  De  G.  &  Sm.  692,  it  does  not 
appear  whether  any  express  agreement  as  to  the  custody  of  the 
books  had  been  entered  into  or  not. 

(?)  See  the  obs.  of  V.-C.  Bacon  in  London  Financial  Ass.  v. 
Kelk,  26  Ch.  D.  151. 

(wi)  See  Oldaker  v.  Lavender,  6  Sim.  239;  Blisset  v.  Daniel, 
10  Ha.  493. 

(n)  See  Ex  parte  Barber,  5  Ch.  687  ;  Laing  v.  Campbell,  36 
Beav.  3,  where,  however,  there  were  no  articles. 


USUAL  CLAUSES.  495 

manifest  when  discovered  ;  but   such  clauses  as  those  Bk.  HL 
here  alluded  to  are  intended   to   be   confined  to  over-  ^haP-  y-  Sect- 

sights  and  blunders,  so  obvious  as  to  admit  of  no  dif-  J 

ference  of  opinion. 

Moreover,  an  account  may  be  conclusive  for  one  pur-  Accounts 
pose,  although  not  for  another,  e.g.,  for  the  purpose  of  conclusive 
calculating  the  profits  to  be  divided  so  long  as  the  firm  for  01?e  Pur" 
is  unchanged,  but  not  for  calculating  the  total  amount  for  another, 
to   be  paid  to   a   partner  on  his  expulsion  from  the 
firm  (o). 

So,  from  the  fact  that  nothing  is  reckoned  for  good- 
will in  taking  annual  accounts  with  a  view  to  a  divi- 
sion of  profits,  it  does  not  follow  that  the  good- will  is 
not  to  be  reckoned  on  a  dissolution  of  the  partnership 
by  the  death  or  retirement  of  a  partner  (p).  Nor  does  it 
follow  that  because  profits  and  losses  are  annually  di- 
vided equally,  the  losses  on  a  final  winding  up  are  to 
be  divided  equally,  without  reference  to  the  capitals  of 
the  partners  (q). 

A  most  important  and  instructive  case  on  this  sub  Covently  v. 
ject  is  Coventry  v.  Barclay  (r).  There  it  was  provided  Barclay, 
that  accounts  *  should  be  taken  and  signed  yearly,  and  [  *  422] 
not  be  afterwards  disputed,  and  that  on  the  death  of  a 
partner  the  survivors  should  be  at  liberty  to  take  his 
share  at  its  value,  according  to  the  last  annual  account 
preceding  his  death.  The  partners  were  accustomed 
in  their  annual  accounts  to  put  a  nominal  value  on 
their  plant  and  stock  in  trade,  and  to  carry  over  a  por- 
tion of  their  profits  to  a  separate  account,  in  order  to 
form  a  reserve  fund  to  answer  unforeseen  losses. 
Shortly  before  the  death  of  one  of  the  partners,  the 
others  bond  fide  made  up  an  annual  account  in  the 
usual  way,  and  sent  him  a  copy  of  it,  which  he  never 
signed,  but  never  in  any  way  disapproved.  It  was 
held  (both  by  Lord  Romilly  and  Lord  Westbury)  that 
the  executors  of  the  deceased  partner  were  bound  by 
the  nominal  valuation  of  the  stock,  &c,  but  (by  Lord 
"Westbury,  reversing  the  decision  belo#)  that  they  were 
entitled  to  a  share  of  the  surplus  of  the  reserve  fund 
after  paying  the  losses,  &c,  to  meet  which  it  was  cre- 
ated. 

(o)  Ante,  pp.  401,  402;  Blisset  v.  Daniel,  10  Ha.  493.  Com- 
pare Coventry  v.  Barclay,  infra. 

(p)  Wader.  Jenkins,  2  Giff.  509.  Compare  Steuart  v.  Glad- 
stone, 10  Ch.  D.  626. 

(q)  Binucy  v.  Mutrie,  12  App.  Ca.  160;  Wood  v.  Scoles,  1  Ch. 
369. 

(r)  33  Beav.  1,  and  on  appeal,  3  De  G.  J.  &  Sm.  320.  See 
also,  Ex  parte  Barber,  5  Ch.  687. 


496 


PARTNERSHIP  ARTICLES. 


Bk.  III. 
Chap.  9.  Sect. 
2. 

Accounts  not 
signed. 

11.  Retiring 
i'rom  the 
firm. 


Power  to 
sell  share. 


[  *  423] 


Co-partners 
to  have  re- 
fusal of 
share. 
Cassels  v. 
Stewart. 


The  accourjts  having,  in  this  case,  been  taken  bond 
fide  and  in  the  usual  way,  and  no  errors  being  suggest- 
ed, the  absence  of  the  deceased  partner's  signature  was 
treated  as  of  no  importance,  for  he  could  not  properly 
have  refused  to  sign  them  (s). 

11.  Retiring. — In  the  absence  of  a  special  provision 
enabling  a  partner  to  retire,  there  is  no  method  by 
which  he  can  do  so  without  a  general  dissolution  and 
winding  up  of  the  firm;  unless,  of  course,  some  agree- 
ment can  be  made  between  all  the  partners  at  the  time 
of  retirement.  Moreover,  as  will  be  seen  hereafter  (t), 
a  partnership  which  has  been  entered  into  for  a  defi- 
nite time,  cannot  be  dissolved  at  the  will  of  any  mem- 
ber. It  is  obviously,  therefore,  in  many  cases  neces- 
sary to  insert  in  the  articles  a  special  clause  enabling 
a  partner  to  retire,  and  defining  the  terms  on  which,  as 
between  himself  and  co -partners,  he  is  to  be  at  liberty 
so  to  do  (u). 

If  it  is  provided  that  a  partner  may  sell  his  share, 
and  no  restrictions  are  mentioned,  he  may  sell  to  any 
one  he  likes,  even  to  a  pauper;  and  on  giving  his  co- 
partners notice  of  his  withdrawal  from  the  firm,  he  will 
cease  to  be  a  member  thereof  as  between  himself  and 
them;  even  although  the  purchaser  *  from  bim  does 
not  come  forward  and  take  his  place  as  a  partner  in 
the  firm  (x).1 

It  is  sometimes  declared  that  a  partner  who  is  de- 
sirous of  retiring  shall  offer  his  share  to  his  co-partners 
before  selling  it  to  any  else.2 

In  a  recent  Scotch  case  a  clause  of  this  kind  was  held 
not  to  preclude  one  of  the  continuing  partners  from 
buying  for  himself  the  share  of  the  outgoing  part- 
ner (y). 

(s)  The  same  thing  occurred  in  Ex  parte  Barber,  5  Ch.  687. 

(t)  Book  iv.  ch.  1,  \\. 

(u)  As  to  the  interest  in  the  goodwill  where  nothing  is  said 
about  it,  see  infra. 

{x)  Jeffervs  v.  Smith,  3  Russ.  158,  ante,  p.  365. 

(y)  Cassels  v.  Stewart,  6  App.  Ca.  64.  The  clauses  were  not  so 
worded  as  to  prevent  such  a  sale. 

1  After  dissolution,  a  proviso  in  the  partnership  articles  that 
no  partner  shall  sell  his  interest  in  the  firm  without  consent  of 
his  associates  is  inoperative.   Noonanr.  McNab,  30  Wis.  277(1872). 

'l  The  fact  that  in  such  a  case  the  continuing  partners  refuse  to 
purchase  does  not  give  the  retiring  partner  a  right  to  drag  a 
stranger  into  the  firm.     McGlensey  v.  Cox,  1  Phila.  3>7. 

A  provision  that  on  the  death  of  one  partner  his  co-partner 
shall  succeed  to  all  his  interest  in  the  firm,  becoming  debtor  for 
its  value  to  the  estate  of  the  deceased,  has  been  held  valid.  Gaut 
v.  Reed,  24  Texas,  46  (1859). 


USUAL  CLAUSES.  497 

In  Homfray  v.  Fotkergill  (z),  the  articles  provided  Bk.  III. 
that  the  offer  should  be  made  first  to  the  other  partners  ^haP-  J-  bect- 

collectively  ;  and  if  they  should  decline,  then  to  those  Z 

desirous  of  collectively  purchasing  ;  and  if  none  such,  Homfray  v- 
then  to  the-partners  individually.  It  was  held  that  an  *othergiii. 
offer  by  one  partner  to  all  the  others  was  equivalent  to 
an  offer  to  all  of  them,  and  also  to  such  of  them  as 
might  be  desirous  of  buying,  and  that  one  of  them  hav- 
ing declined  to  buy,  the  others  were  at  liberty  to  do  so, 
although  no  fresh  offer  to  sell  to  them  had  been  made, 
and  the  retiring  partner  refused  to  make  such  offer. 

In  Glassington  v.  Thicaites  (a),  the  articles  provided  How  notice 
that  no  share  should  be  disposed  of  by  any  partner  ™'^nbe 
until  one  month  after  notice  in  writing  under  his  hand  ^lasg-n<Tton 
had  been  given  to  the  other  proprietors  at  a  monthly  r  Thwaites. 
meeting.     A  partner  desirous  of  selling  his  share,  wrote 
a  notice  to  that  effect  in  a  book  which  was  produced  at 
monthly  meetings,  and  which   all  the  partners  had  at 
all  times  power  to  inspect.     It  was  held  that  the  notice 
so  given  was  sufficient,  even  although  the  book  was  not 
seen  by  all  the  partners.     As  a  general  rule,  however, 
notice  should  be  given  to  each  partner  individually  (6). 

Where  two  persons  became  partners,  and  agreed  that  Saie  if  offer 
in  the  case  of  the  death  of  either,  the  other  should  buy  is  declined, 
his  share,  or  if  he  declined  so  to  do,  then  that  the  share  Featherston- 
of   the   deceased    should   be  sold  to  any  person   who  Jj,aug^«- 
might  choose  to  buy  it,  one  of  the  partners  died,  and 
the  survivor  declined  to  buy  his  share,  or  to  enter  into 
partnership  with   any  purchaser  of   it.     Under  these 
circumstances,  theCourt,  at  the  suit  of  the  *  executor  of  [  *  424] 
the  deceased  partner,  decreed  a  sale  of  his  share,  and 
directed  that,  if  no  bond, fide  sale  could  be  effected,  an 
account  should  be  taken  in  order  to  ascertain  the  value 
of  such  share.     No  sale  being  effected,  and  the  accounts 
having  been  taken,  the  surviving  partner  was  decreed 
to  pay  the  amount  of  the  share  of  the  deceased  and  the 
costs  of  the  suit  (c). 

Articles   of  partnership   frequently  contain  a  clause  Declaring 
to  the  effect,  that   in   case   a   partner  is  desirous  of  re-  option  to 
tiring,  he  shall  give  so  many  months'  notice  to  his  co   purchase. 
partner,  who  shall  have  the  option  of  purchasing  the 
share  of  the  retiring  partner.     If  such  a  clause  is  acted 
on,  and  a  partner  notifies  his  desire  to  retire  to  his  co- 
partner, and  the  latter  declares   his  option  to  purchase 

(z)  1  Eq.  567. 

(a)  Coop.  temp.  Brougham,  115. 

(6)  lb. 

(o)  Featberstonhaugh  v.  Turner,  25  Beav.  382. 

*  9   LAW   OF   PARTNERSHIP. 


498 


PARTNERSHIP  ARTICLES. 


Bk.  III. 
Chap.  9.  Sect. 


Enlarging 
time  for 
purchasing. 


[*425] 

12.  Dissolv- 
ing the 
firm. 


the  share  of  the  retiring  partner,  a  contract  is  thereby 
concluded  between  them,  from  which  neither  can  de- 
part without  the  consent  of  the  other  (d)  Conse- 
quently, the  retiring  partner  cannot  withdraw  his  notice 
and  dissolve  the  partnership  under  some  other  clause 
in  the  deed  (d.)  Even  if  the  co-partner  who  is  to 
purchase  the  other's  share  infringes  partnership  ar- 
ticles, the  Court  will  not  willingly  interfere  and  dissolve 
the  partnership  ;  although,  if  the  partner  who  is  to 
retire  conducts  himself  so  as  to  prejudice  the  business 
and  exclude  the  other,  the  Court  will  interpose  for  the 
protection  of  the  latter  ;  for  otherwise  the  business  to 
which  he  is  shor*l)  to  be  solely  entitled  may  be  en- 
tirely ruined  (e). 

"With  respect  to  the  exercise  of  a  right  of  pre-emption, 
it  must  be  borne  iu  mind  that  if  the  right  is  to  be 
exercised  within  a  given  time  it  cannot  be  exercised 
afterwards,  unless  the  time  has  been  enlarged  by  the 
parties  themselves.  "*  Courts  will  not  extend  the  time  on 
the   ground  that  it  was   accidentally  allowed    to  slip 

by  (/)• 

\\  here  an  offer  to  sell  was  made  to  a  person  who 
became  lunatic  after  it  was  made,  but  before  the  time 
for  accepting  it  had  expired,  it  was  held  that  his  com- 
mittee was  not  *  entitled  to  an  extension  of  such  time, 
nor  to  a  renewal  of  the  offer  (g). 

12.  Dissolving  the  firm. — TVhere  the  articles  expressly 
stipulate  that  it  shall  be  lawful  for  either  partner  to 
dissolve  the  partnership  upon  the  commission  by  the 
other  of  certain  specifically  forbidden  acts,  the  partner- 
ship may  of  course  be  determined  if  either  partner 
does  these  acts.  But  this  clause,  like  any  other,  may 
be  waived  by  mutual  consent ;  and  even  if  not  waived, 
advantage  cannot  be  taken  of  it  to  dissolve  the  part- 
nership on  the  ground  of  the  commission  of  any  for- 
bidden act  after  the  lapse  of  any  considerable  time 
since  such  act  came  to  the  knowledge  of  the  partner 
seeking  to  avail  himself  of  it  (h). 

(d)  See  Warder  v.  Stihvell,  3  Jur.  X.  S.  9,  V.  C,  Stuart; 
Homfray  v.  Fothergill,  anfc  p.  423. 

(e)  Sec  Warder  v.  StilweB\  3  Jur.  X.  S.  9. 

(/)  See,  on  this  subject.  Brooke  v.  Garrorl,  2  De  G.  &.  J.  62  ; 
Lord  Ranelaugh  r.  Melton,  2  Dr.  &Sm.  278. 

(g)  Rowlands  v.  Evans,  and  Williams  v.  Rowlands,  30  Bear.  302. 

(//  See  Anderson  v.  Anderson,  25  Beav.  1!!<>.  which  must  not  be 
considered  as  an  authority  for  the  doctrine  that  the  Court  will 
not  hold  partners  to  their  articles.  The  notice  to  dissolve  in 
that  case  was  given  six  months  after  the  commission  of  the  act 
complained  of,  and  not  on  account  of  such  act,  but  in  conse- 
quence of  other  disputes. 


USUAL  CLAUSES.  499 

It  is  not  unusual  to  provide  for  a  dissolution  or  re-  Bk.  III. 
tirement  in  case  a  partner  shall  become  insolvent.    The  Chap. i)-  Sect- 

word  insolvent,  unless  controlled  by  the  context,  means  _! 

unable  to  pay  debts,  in  the  ordinary  acceptation  of  that  In  case  of 
phrase.  A  person  may  therefore  be  insolvent,  although  insolvency, 
his  assets,  if  all  turned  into  money,  might  enable  him 
to  pay  his  debts  in  full  (i)  ;  and  although  he  has  not 
been  adjudicated  bankrupt  or  compounded  with  his 
creditors  (k).  But  a  person  is  not  deemed  insolvent 
merely  because  he  keeps  renewing  a  bill  which  he  can- 
not conveniently  meet  (I). 

A  clause  enabling  any  partner  to  determine  the  part-  Giving 
nership  by  giving  notice  to  the  others,  may  be  acted  on,  notice  where 
although  one  of  the  firm  has  become  insane  ;  for  the  ?n?  Partner 
partner  serving  the  notice  is  not  bound  to  find  under- 
standing for  him  who  is  served  (in). 

*  A  notice  once  given  cannot  be  withdrawn  except  by  [  *  42«] 
consent  (n).  Withdrawal 

A  notice  to  dissolve  on  a  given  day  of  the  week,  and      11(,I;<'' 

a  given  day  of  the  month,  is  bad  if  there   is   any  mis-  Inf°rmal 

.        .  .  *  notice 

take  in  either  date  ;  e.g.,  a  notice  to  dissolve   on   Mon- 
day the  9th  is  bad,  if  the  9th  falls  on  a  Friday  (o). 

In  a  case  where  it  was  provided  that  the  dissolution  Dissolution 
should  be  by  deed,  it  was  held  that  a  submission   by  to  °c  1jy 
deed  of  all  matters  in  dispute  between  the   partners,  deed, 
and  an  award  under  seal  made  upon   that  submission 
dissolving  the  partnership,  had  the  effect  of  dissolving 
it,  although  nothing  was  said  about  dissolution   in   the 
submission  (p). 

When  power  is  given  to  retire  or  dissolve   the   firm,  Signing 
or  to  expel  a  partner  from  it,  power  should  also  be  given  notices  of 
to  any  partner  to  sign,  in  the  name  of  himself  and  co-  dissolution. 
partners,  a  notice   of  dissolution   for   insertion   in   the 
"Gazette"  (q). 

13.   Expelling. — In  order  that  an  objectionable  part-  13.  Towers  of 
ner  may  be  summarily  got  rid  of,  clauses  are  sometimes  exPnlslon- 

ft)  Seeder  Le  Blanc,  J.,  in  Baylay  v.  Schofield,  1  M.  &  S.  338. 

(k)  See  Parker  r.  Gossage,  2  C.  M.  &  R.  617,  and  Biddlecombe 
v.  Bond,  4  A.  «*t  E.  332,  in  which  it  was  held  that  '"insolvent" 
had  not  the  technical  meaning  of  having  taken  the  beneht  of 
the  act  for  the  relief  of  insolvent  debtors. 

(/)  Cutten  v.  Sanger,  2  Y.  &  J.  459;  and  see  Anon.,  1  Camp.  492. 

(m)  Roberson  v.  Lockie,  15  Sim.  285. 

(«)  Jones  r.  Lloyd,  18  Eq.  265. 

(o)  Watson  v.  Eales.  23  Beav.  294. 

(p)  Hutchinson  v.  Whitfield,  Haves  (Ir.  Ex.),  78. 

(q)  See  Troughton  v.  Hunter,  18  Beav.  470.  The  Court,  will, 
however,  compel  a  partner  to  do  this  on  a  dissolution,  Hendry  v. 
Turner,  32  Ch.  D.  355. 


500  PARTNERSHIP  ARTICLES. 

Bk.  III.  inserted  providing  for  expulsion  in  certain  events.1  The 
Chap.  9.  Sect.  (3ourt  cannot  control  the  exercise  of  a  power  to  expel 
if  it  is  exercised  bond  fide   (r).     But   all   clauses  con- 
ferring such  a  power  are  construed  strictly,  on  account 
of  the  abuse  which  may  be  made  of  them,  and  of  the 
hardship  of  expulsion  ;  and  the  Court  will  never  allow 
a  partner  to  be  expelled  if  he  can  show  that  his  co- 
partners, though  justified  by  the  wording  of  the  expul- 
sion clause,  have,  in  fact,  taken  advantage  of  it  for  base 
and  unworthy  purposes  of  their  own,  and  contrary  to 
that  truth  and  honour  which  every  partner  has  a  right 
to  demand  on  the  part  of  his  co- partners.     In  Blissetx. 
Blisset  v.         Daniel  (s),  the  expulsion  clause  was  as  follows  : — 
Daniel. 

"That  it  shall  be  lawful  for  the  holders  of  two-thirds  or  more 
of  the  shares  for  the  time  being,  from  time  to  time  to  expel  any 
[  *  4271  partner,  by  giving  *  to,  or  leaving  for  him,  at  his  then  or  last 
place  of  abode  in  England  or  Wales,  a  notice  in  writing  under 
their  hands  of  such  expulsion,  which,  in  such  event  shall  operate 
from  and  at  the  time  of  the  giving  or  leaving  such  notice,  and 
shall  be  in  the  following  form,  namely,  '  We  do  hereby  give  you 
notice  that  you  are  hereby  expelled  from  the  partnership  carried 
on  under  the  firm  of  John  Freeman  and  Copper  Company.  Wit- 
ness our  hand  this day  of .'  " 

The  power,  therefore,  was  in  the  most  general  terms ; 
no  reasons  for  its  exercise  were  required  to  be  given,  no 
meetings  or  deliberations  were  declared  to  be  necessary, 
before  serving  the  notice.  The  holders  of  two-thirds 
of  the  shares  signed  a  notice  in  the  form  prescribed, 
and  served  it  on  the  partner  wbom  they  desired  to  ex- 
pel. They  gave  no  reasons,  and  relied  upon  the  clause 
set  out  above.  But  it  appeared  that  they  desired  to  get 
rid  of  their  co-partner,  not  because  so  to  do  was  in  any 
sense  for  the  benefit  of  the  firm  in  a  mercantile  point 
of  view,  but  because  he  objected  to  the  appointment  of 
one  of  his  co-partner's  sons  as  co-manager  with  his 
father.  It  further  appeared  tbat  the  offended  father 
had  complained  to  the  other  partners  behind  the  back 
of  the  expelled  partner,  and  had  prevailed  upon  them 
to  sign  the  notice,  intimating  that  either  the  expelled 

(r)  Russell  v.  Russell.  14  Ch.  D.  471;  Steuart  v.  Gladstone,  10 
ib.  626. 

(s)  Blisset  v.  Daniel,  10  Ha.  493.  See,  also,  Wood  v.  Wood, 
L.  R.  9  Ex.  190. 


'■The  right  of  expulsion  does  not  exist  unless  especially  pro- 
vided for  by  the  partnership  articles.  Patterson  v.  Silliman,  28 
Pa.  St.  304  (1857);  Pratt  v.  Willard,  3  McLean,  27  (1842);  Gor- 
man v.  Russell,  14  Cal.  531  (1860). 


USUAL  CLAUSES.  501 

partner  or  himself  must  leave  the  firm.     The  expelling  Bk.  III. 
partners  having  resolved  to  exercise  the  power,  induced  Chap.  9.  Sect. 

the  expelled  partner  to  sign  certain  accounts,  in  order  J 

that  he  might  be  bound  by  them  when  expelled.  Their 
intention  to  expel  him  was,  however,  concealed  until 
after  the  accounts  were  signed;  and  the  notice  of  ex- 
pulsion, which  gave  him  the  first  intimation  of  any  de- 
sign to  get  rid  of  him,  was  not  served  until  he  had 
signed  the  accounts.  Under  these  circumstances,  the 
Court  declared  that  the  notice  of  expulsion  was  void, 
and  restored  the  expelled  partner  to  his  rights  as  a 
member  of  the  firm. 

Having  regard  to  the  principles  acted  upon  in  cases  Opportunitv 
of  this  description,  it  is  conceived  that  a  power  to  expel  for  explana- 
for  misconduct  cannot  be  safely  acted  upon  until  the  tiori- 
delinquent  partner  has  had  an  opportunity  of  explain- 
ing his  conduct  (t). 

A  power  of  expulsion  cannot  be  exercised  without  All  must 
the  Concurrence  of  all  those  whose  concurrence  may  be  [  *  428] 
required  by  the  articles  (u).  concur. 

A  notice  of  expulsion  under  one  clause,  cannot,  if  in-  Notice  of 
valid,  operate  as  a  notice  of   dissolution  under  some  expulsion. 
other  clause  (x). 

In  Smith  v.  Mules  it  was  provided,  in  effect,  that  if  a  Smith  v. 
partner  should  do  or  omit  to  do  certain  things,  the  others  Mules, 
should  be  at  liberty  to  dissolve  the  partnership,  by  giv- 
ing notice  to  the  partner  who  should  offend ;  and  that 
upon  giving  such  notice  the  partnership  should  cease 
and  be  dissolved  in  the  same  manner,  and  with  the 
same  consequences,  as  if  it  had  been  determined  by  the 
voluntary  retirement  of  the  offending  partner.  The 
firm  consisted  of  three  partners,  A,  B.,  and  C,  who 
was  B.'s  son.  B.  was  guilty  of  conduct  for  which  he 
might  have  been  compelled  to  retire.  A.  gave  B.  and 
C.  notice  that  he  dissolved  the  partnership  under  the 
clause  above  referred  to.  C,  however,  had  done  noth- 
ing rendering  it  competent  for  A.  to  expel  him.  It  was 
therefore  decided:  1,  that  A.  had  no  right  to  expel  B. 
without  C.'s  concurrence;  2,  that  A  had  no  right  to 
dissolve  the  firm,  so  far  as  C.  was  concerned;  3,  that  C 
having  adopted  the  notice  after  it  was  given,  A.  could 
not  treat  the  partnership  as  continuing;  and  4,  that  the 

(t)  See  the  judgment  in  Blisset  v.  Daniel,  and  Cooper  v. 
Wandsworth  Board  of  Works,  14  C.  B.  N.  S.  180. 

(«)  See  Steuart  v.  Gladstone,  10  Ch.  D.  626:  Smith  v.  Mules,  9 
Ha.  556. 

(x)  See  Smith  v.  Mules.  9  Ha.  556;  Hart  v.  Clarke,  6  De  G.  M. 
&  G.  232,  and  Clarke  v.  Hart,  6  H.  L.  C.  633. 


502 


PARTNERSHIP  ARTICLES. 


Bk.  III. 
Chap.  9.  Sect. 


Power  to 
expel  in 
case  to 
<  mitting  to 
do  tilings. 


[*429] 

14.  Valua- 
tion of 
shares. 


General  rule 
-where  the 
articles  ean- 
not  be  acted 


Agreements 
for  fair 

division. 


Methods  of 

avoiding 

sale. 


dissolution  actually  brought  about  was  not  a  dissolution 
provided  for  by  the  articles,  and  did  not,  therefore,  en- 
tail the  consequences  of  a  dissolution  under  them  (y). 

When  a  power  of  expulsion  is  given  in  the  event  of 
a  partner  omitting  to  do  certain  things,  e.g.,  entering  in 
the  partnership  book  all  monies  he  may  receive  on  ac- 
count of  the  partnership,  the  power  will  not,  as  a  rule, 
be  exerciseable,  unless  the  omission  was  a  studied 
omission  (z). 

As  to  power  to  expel,  in  case  a  partner  becomes  in- 
solvent, see  ante,  p.  425. 

A  power  to  expel  contained  in  articles  for  a  partner- 
ship for  a  term  of  years  is  not  exerciseable  after  the 
term  has  expired,  *  although  the  partnership  may  have 
been  continued  on  the  old  footing  (a). 

14.  Valuation  of  shares. — Having  provided  for  the 
events  upon  which  a  partnership  is  to  cease,  the  next 
point  is  to  specify  the  method  in  which  its  affairs  are 
to  be  wholly  or  partially  wound  up. 

Where  the  articles  have  prescribed  no  method  of 
winding  up,  or  where  the  method  prescribed  cannot  be 
carried  into  effect,  then,  unless  the  partners  can  come 
to  some  agreement  as  to  what  is  to  be  done,  there  must, 
as  a  general  rule,  be  a  conversion  of  all  the  partnership 
property  into  money;  and  this  money,  after  payment  of 
the  partnership  debts,  must  be  divided  amongst  the 
partners  in  the  shares  in  which  they  may  be  entitled  to 
it  (6). 

An  agreement  that  on  a  dissolution  the  partnership 
property  shall  be  fairly  and  equally  divided,  after  pay- 
ment of  its  debts,  has  been  held  to  mean  that  the  prop- 
erty shall  be  sold,  and  that  the  money  produced  by  the 
sale  shall  be  divided  after  the  debts  had  been  paid  (c). 

In  order  to  prevent  the  ruin  consequent  on  a  sale 
when  a  partnership  happens  to  be  dissolved,  several 
devices  are  had  recourse  to.  The  simplest  is  to  specify 
in  the  articles  a  sum  at  which  the  share  of  an  outgoing 
or  deceased   partner  may  be    taken    by   his    co-part- 


{y)  Smith  v.  Mules.  9  Ha.  556. 

(z)  See  Smith  v.  Mules,  9  Ha.  556. 

(a)  Clark  v.  Leach.  32  Beav.  14,  and  1  De  G.  J.  &  Sm.  409. 
See  Neilson  v.  Mossend  Iron  Co.,  11  App.  Ca.  298. 

(61  See  Cook  v.  Collingridge,  Jac.  607  ;  Kershaw  v.  Matthews, 
2  Russ.  62;  Wilson  v.  Greenwood,  1  Swanst.  482.  That  this 
rule  is  not  to  be  rigorously  applied,  see  Pettyt  v.  .Taneson,  6 
Madd.  146,  and  Simmons  v.  Leonard,  3  Ha.  581,  r.oticed  infra, 
p.  431. 

fe)  Rigden  v.  Pierce,  6  Madd.  353  ;  Cook  v.  Collingridge,  Jac. 
607. 


USUAL  CLAUSES.  503 

ners  (d).     But  it  is  seldom  possible  to  fix  a  sum  be-  Bk.  III. 
forehand,   and  consequently  such   a  provision   is  not  Chap.  9-  Sect. 

common.     It  is  more  usual  to  stipulate  that  the  share  J 

shall  be  taken  to  be  of  the  value  appearing  in  the  last- 
signed  account,  and  be  paid  with  the  addition  of  sub 
sequent    profits,  or   with   interest  at   a  certain   rate,  in 
lieu  of  such  profits.     If   a  stipulation  to  this  effect  is 
made,  and  the  accounts  have  been  regularly  taken  and 
signed,  or  regularly  taken  but  not  signed  (e),  *  so  that  [  *  430] 
the  shares  of  the  partners  appear  from  the  accounts  as 
intended,  all  parties  must  abide  by  the  stipulation  (/), 
although  difficulties  may  arise  as  to  the  true  construc- 
tion of  the  articles  (g).     But  if,  as  frequently  happens,  Effect  of  not 
the  accounts  intended  to  be  taken  and  signed  have  not  keeping 
been  taken,  or  have  been  taken  irregularly,  so  that  the  accounts  as 
last-signed  account  is  not  so  late  a  one  as  is  contem-  a»ree  ■ 
plated  by  the  articles,  in  such  a  case  the  account  must 
be  made  up  to  the  latest  date  at  which  it  ought  to  have 
been  made  up,  regard  being  had  to  the  articles  and  the 
practice  of  the  partners;  and  the  share  of  the  out-going 
or  deceased  partner  must  be  taken  at  its  value,  as  the 
same  appears  by  the  account  so  taken. 

Thus  in  Petty t  v.  Janeson  (h),  the  articles  provided  Pettyt  p. 
that  the  partnership  accounts  should  be  taken  every  Janeson. 
25th  of  March,  and  that  if  either  partner  died  during 
the  continuance  of  the  partnership,  his  interest  should 
be  regulated  by  the  last  yearly  settlement,  and  what 
should  then  appear  to  be  due  to  him  should  be  paid  to 
his  executors,  with  five  per  cent,  interest,  instead  of 
subsequent  profits.  For  some  time  the  partnership 
accounts  were  regularly  settled  every  25th  of  March; 
but  afterwards  they  were  made  up  very  irregularly,  and 
often  not  for  sixteen  or  eighteen  months.  A  partner 
died  in  February,  1813.      The  last  account  prior  to  his 

(d)  Effect  was  given  to  such  a  provision  in  Essex  v.  Essex,  20 
Beav.  142. 

(e)  As  in  Ex  parte  Barber,  5  Ch.  687;  Coventry  u.  Barclay.  3 
DeG.  J.  &  Sm.  320. 

(/)  King  v.  Chuck,  17  Beav.  325;  Gainsborough  v.  .Stork, 
Barn.  312  ;  and  the  cases  in  the  last  note. 

'/i  A  provision  that  a  share  shall  he  paid  for  as  the  same  stood 
at  the  time  of  the  last  account,  means  as  it  stood  in  the  partner- 
ship hooks.  See  Blisset  v.  Daniel,  10  Ha.  493,  p.  511.  See,  as 
to  clauses  of  this  description,  Coventry  v.  Barclay,  ante,  p.  421  ; 
Ex  parte  Barber,  ubi  supra  ;  and  Browning  r.  Browning,  31  Beav. 
316,  as  to  interest  and  subsequent  drawings  out.  As  to  the 
calculation  of  interest  where  the  share  is  to  be  paid  out,  with 
interest,  by  instalments,  see  Ewing  v.  Ewing,  8  App.  Ca.  822. 
As  to  goodwill,  Stewartfl.  Gladstone,  10  Ch.   D.  620,  and  infra, 

(h)  6  Madd.  140. 


504  PARTNERSHIP  ARTICLES. 

Bk.  III.  death  was  settled  on  the  5th  of  November.  1811.     The 

Chap.  9.  Sect.  executors  insisted   that  as   there  had   been   no  annual 

J settlement,  as  contemplated  by  the  articles,  they  were 

entitled  to  a  share  of  the  profits  calculated  to  the  time 
of  their  testator's  death.  The  surviving  partner,  on 
the  other  hand,  contended  that  all  they  were  entitled 
to  was  the  amount  of  their  testator's  share,  as  appear- 
ing by  the  account  settled  in  November,  1811,  with  in- 
terest thereon.     But  the  Vice-Chancellor  observed  : — 

[  *  431]  *"  That  the  articles  had  two  plain  intentions — that  there  should 
be  an  annual  settlement,  and  that  the  estate  of  a  deceased  part- 
ner should  receive  no  profits  for  the  fraction  of  the  year  since  the 
last  annual  settlement.  That  the  settlement  of  the  5th  Novem- 
ber, 1811,  was  to  be  considered  as  a  settlement  substituted  by  the 
agreement  of  the  parties  in  the  place  of  the  settlement  stipulated 
for  in  the  articles.  That  if  the  testator  had  died  on  the  1st  Oc- 
tober, 1812,  it  could  not  have  been  contended  that  his  estate  was 
to  take  profits  subsequent  to  the  5th  November,  1811,  being  the 
last  settlement  within  a  year  of  the  death  ;  and  if  this  were  to  be 
treated  in  that  case  as  a  settlement,  within  the  spirit  of  the  arti- 
cles, against  the  testator's  estate,  it  must  be  equally  considered 
as  a  settlement  for  the  testator's  estate  as  a  settlement  on  the  5th 
November,  1811,  which  bound  each  party  to  come  to  the  next 
annual  settlement  on  the  5th  November,  1812.  That  the  Court 
must  act  upon  that  which  ought  to  have  been  done  as  if  it  had 
been  done,  and  must  declare  the  testator's  estate  entitled  to  a 
share  in  the  profits  up  to  the  5th  November,  1812,  being  the  day 
which  ought  to  have  been  the  last  annual  settlement  before  the 
testator's  death. " 

Simmons  v.  The  same  principle  was  acted  upon  by  V.-C.  "Wigrain, 
Leonard.  in  Simmons  v.  Leonard  (i),  although  no  account  hav- 
ing ever  been  taken  between  the  parties,  and  the  day 
mentioned  in  the  articles  for  taking  the  account  not  being 
apparently  considered  of  much  importance,  the  account 
directed  to  be  taken  did  not  stop  at  the  day  at  which  the 
last  account  would  have  been  taken  if  the  articles  had  been 
acted  on.  In  Simmons  v.  Leonard,  the  articles  provided 
that  a  general  account  and  rest  should  be  taken  every  31st 
of  December,  or  on  such  other  day  as  the  partners  should 
agree  upon;  and  that  if  a  partner  died  during  the  term 
his  executors  should  receive  payment  of  his  share  as  as- 
certained at  the  last  annual  rest,  with  interest  thereon, 
in  lieu  of  subsequent  profits;  and  that  his  executors 
should  have  no  right  to  look  into  the  partnership  books. 
The  provision  relative  to  the  annual  settlement  of  an 
(<)  3  Ha.  581. 


USUAL  CLAUSES.  505 

account  was  never  acted  upon  at  all.     One  of  the  part-  Bk.  III. 
ners  died,  and  the  Vice  Chancellor  held  that  the  prim-  Chap.  9.  Sect. 

ary  object  of  all  parties  was,  that  the  death  of  one  of  J 

them  should  not  cause  a  general  dissolution  and  wind- 
ing up;  that  this  object  might  be  obtained,  although 
no  such  account  as  was  contemplated  had  been  taken; 
that  it  was  absolutely  necessary  to  take  an  account  of 
some  sort,  and  to  let  the  executors,  therefore,  look  into 
the  partnership  books;  and  that,  having  regard  to  the 
omission  of  *the  partners  to  settle  any  account  at  all,  [  *  432] 
the  only  account  which  could  be  taken  was  a  general 
account  of  what  was  due  to  the  testator  at  the  time  of 
his  death  for  his  share  of  capital  and  profits. 

In  Lawes  v.  Lawes  (k)  the  articles  provided  for  tak-  Lawes  v. 
ing  half-yearly  accounts,  and  that  on  the  death  of  a  Lawes. 
partner  his  share  should  be  taken  at  the  amount  settled 
by  the  last  half-yearly  account.  The  accounts  were  in 
fact  settled  once  a  year  only;  but  on  the  death  of  a 
partner  it  was  held  that  his  share  was  not  to  be  taken 
at  the  amount  shown  by  the  last  annual  account  actually 
taken,  but  at  the  amount  shown  by  an  account  to  be 
taken  at  the  end  of  the  half-year  next  before  his  death 
as  stipulated  by  the  articles. 

These  cases  not  only  afford  good  illustrations  of  the 
rule  that  in  construing  partnership  articles  regard  must 
be  had  to  the  conduct  of  the  partners,  even  where  a  cir- 
cumstance has  arisen  of  which  the  partners  had  no  pre- 
vious experience  (I),  but  they  also  show  that  this  rule 
will  not  be  applied  unfairly,  and  further  that  the  rule 
that  there  must  be  a  sale  of  the  partnership  property 
whenever  there  is  a  dissolution,  unless  the  articles  provide 
for  some  other  method  of  dealing  with  it,  and  the  pro- 
visions in  the  articles  are  capable  of  being  rigorously  car- 
ried out,  must  be  taken  with  considerable  qualification  (m). 

It  is  not  unusual  to  stipulate  that  the  share  of  an  out-  Taking  share 
going  or  deceased  partner  shall  be  taken  by  the  contin-  at  a  valua- 
uing  or  surviving  partners  at  a  valuation;  and  although      n- 
as  a  rule  specific  performance  of  an  agreement  for  sale 
at  a  valuation  will  not  be  decreed  unless  the  valuation 
has  been  made  (n);  yet  where  persons  enter  into  part- 
nership upou  certain  terms,  one  of  which  is,  that  on  a 

(*)  9  Ch.  D.  98. 

(l)  See,  too,  Jackson  v.  Sedgwick.  1  Swanst.  460  ;  Coventry  v. 
Barclay,  and  Ex  parte  Barber,  ante,  note  (e). 

(m)  See,  as  to  the  rule  referred  to,  ante,  \>.  429. 

(n)  See  Vickers  v.  Vickers,  4  Eq.  ">:29.  a  case  between  partners 
and  the  authorities  there  cited.  The  rule  docs  not  apply  to  a 
valuation  of  things  which  arc.  accessories  to  the  main  purchase. 
See  Jackson  v.  Jackson,  1  Sin.  &  G.  184. 


506 


PARTNERSHIP  ARTICLES. 


Bk.  III. 
Chap.  9.  Sect. 
o 

[  *  433] 


15.  Introduc 
tion  of  new 
partner  in 
lieu  of  a 
dead  or  re- 
tired part- 
ner. 


dissolution  one  partner  shall  take  the  share  of  another 
at  a  valuation,  the  Court  will,  on  a  dissolution  under 
the  articles,  enforce  such  a  stipulation,  and  if  necessary 
*  itself  ascertain  the  value  of  the  share  (o).  It  has, 
however,  been  held,  that  an  agreement  for  a  sale  at  a 
price  to  be  fixed  by  valuers,  one  to  be  appointed  by  the 
seller  and  the  other  by  the  purchaser,  or  in  case  the 
valuers  differ,  by  an  umpire,  does  not  enable  the  Court 
to  appoint  an  umpire  if  the  valuers  will  not  do  so,  and 
are  yet  themselves  unable  to  fix  a  price  (p).  Moreover, 
Wilson  v.  Greenwood  (q),  throws  considerable  doubt  on 
the  validity,  in  the  event  of  a  bankruptcy,  of  an  agree- 
ment that  the  share  of  a  bankrupt  partner  shall  be  taken 
at  a  valuation  by  his  co-partners. 

15.  Transmission  of  shares  and  introduction  of  new 
partners. — It  is  a  common  provision  iu  partnership 
articles  that  on  the  death  of  a  partner  his  executors, 
or  his  son,  or  some  other  person,  shall  be  entitled  to 
take  his  place.  The  effect  of  any  such  provision 
must  of  course  depend  on  its  words  ;  but  speaking 
generally  it  may  be  said, — 

1.  That  clauses  of  this  kind,  although  they  bind  the 
surviving  partners  to  let  in  the  person  nominated  (r), 
do  not  bind  him  to  come  in,  but  give  him  an  option 
whether  he  will  do  so  or  not  (s)  ; 

2.  That  before  making  up  his  mind  he  is  entitled  to 
make  himself  acquainted  with  the  state  of  the  partner- 
ship affairs,  although  he  is  not  entitled  to  have  its  ac- 
counts formally  taken  (t)  ; 

3.  That  if  he  is  desirous  of  coming  in,  he  must  com- 
ply strictly  with  the  terms  upon  which  alone  he  is  en- 
titled to  do  so  (u); 1 


(o)  Dinham  v.  Bradford,  5  Ch.  519.  See,  as  to  contracts  to  sell 
at  a  fair  valuation,  as  distinguished  from  a  valuation  to  he  made 
by  particular  individuals.  Fry  on  Spec.  Perf.  154,  2nd  ed. 

(p)  Collins  v.  Collins,  26  Beav.  306;  and  see  Vickers  v.  Vickers. 
4  Eq.  529. 

(q)  1  Swanst.  471 .     See,  also,  Whitmore  v.  Mason,  2  J.  &  IT.  204. 

(r)  In  Wainwright  v.  Waterman.  1  Ves.  J.  311,  a  person  was 
declared  entitled  to  he  admitted,  although  those  with  whom  that 
question  rested  were  divided  in  opinion.  But  in  Milliken  v. 
Milliken,  8  Ir.  Eq.  16.  it  was  held  that  a  person  who  is  to  he  let 
in,  provided  he  conducts  himself  to  the  satisfaction  of  the  sur- 
vivors, is  without  remedy  if  they  will  not  admit  him. 

(s)  Pigott  v.  Bagley,  McCl.  &  Y.  569;  Madgwick  v.  Wimble, 
6  Beav.  495;  Downs  v.  Collins,  6  Ha.  418  ;  Page  v.  Cox,  10  Ha. 
163.     See,  too,  Pearce  v.  Chamberlain.  2  Ves.  S.  33. 

(f)  Pigott  v.  Bagley,  McCl.  &  Y.  569. 

(«)  Holland  v.  King,  6  C.  B.  727  ;  Brooke  v.  Garrod,  3  K.  &  J. 

1  Alexander  v.  Lewis,  47  Texas.  481  (1877). 


USUAL  CLAUSES.  507 

*  4.  That  if  he  declines  to  come  in,  and  there  is  no  [  *  434] 
provision  as  to  what  is  then  to  be  done,  the  partnership  Ek.  III. 
must     be     dissolved     and    wound    up     in    the     usual  Chap. 9-  Sect. 
way  (v). 


As  a  general  rule,  and  excluding  cases  of  agency,  an  Persons  en- 
agreement  between  two  persons    cannot    be    enforced  titled  to 
against  either  of  them  by  a  third  person,  even  although  *ilim'(!  Wl11. 
such  third  person  was  intended  to  derive  a  benefit  from  et  u|t„ 
the  agreement  (x).     In  Page  v.  Cox  it   was   attempted  pao.e      qox 
to  apply  this  rule  to  an  agreement  between   two  part- 
ners, that  on  the  death  of  one  his   widow  should  suc- 
ceed him.     One  of  the  partners  was  dead  ;  it  was  con- 
tended that  his  widow  had  no  right  to  succeed.     But  it 
was  held  that  the  rule  in  question   had   no  application 
to  such  a  case  ;  that  the  articles  had  created  a  valid 
trust  in  favour  of  the  widow  ;  and  that  she  was  entitled 
to  come  to  the  Court  for  a  decree  for  the  execution  of 
such  trust  (y). 

In  a  case  where  articles  provided  that  in  the  event  of  Cases  of 
the  death  of  a  partner  during   the  term  for  which  the  settled  share, 
partnership  was  intended  to  last,  his  share  should  go  to  Balmain  v. 
his  widow  for  life,  and  after  her  death  to  his  children,  and      01e" 
in  default  of  children  to  his  widow's  executors,  admin- 
istrators, or  assigns  ;  it  was  held  that  the  children  of  a 
partner  who  had  died  leaving  a  widow,  did  not  take  any 
vested  interest  in   the  partnership  assets  during  her 
life  (z). 

In  another  case  partnership  articles  provided  that  on  Appointment 
the  death  of  a  partner  the  survivor  should  carry  on  the  °f  successor, 
business  for  the  benefit  of  himself  and  such  person  as  Ponton  v. 
the  other  should  by  will  appoint,  and,  in  default  of  ap-  ■Uunu- 
pointment,  for  the  benefit    of    his    widow,  or   (if  she 
should  be  dead)  for  the  benefit  of  his  children,  and  in 
default  of  children  for  the  benefit   of  his  executors  or 
administrators  ;  and  that  such  a  person,  or    the    said 
widow,  children,  executors,  or  administrators,    should 
stand  in  the  place  of   the  deceased,  and  be  entitled  to 
the  same  share  in,  and  have  the  same  control  over,  the 
partnership  trade  and  assets,  as  the  deceased  would  him- 
self have  been  entitled  to  if  *  living.     It  was  held  that  [  *  435] 

608,  and  2  De  G.  &  J.  62;  Milliken  v.  Milliken,  supra,  note  (r). 
See  Ex  parte  Marks,  1  D.  &  Ch.  499. 

(v)  Kershaw?;.  Matthews,  2  Russ.  62;  Downs  v.  Collins,  6  Ha. 
418  ;  Madgwick?;.  Wimble,  6  Beav.  495. 

(x)  See  Colyear  v.  The  Countess  of  Mulgrave,  2  Keen.  81  ;  Re 
Empress  Engineering  Co.,  16  Ch.  D.  125. 

(y)  Page  v.  Cox,  10  Ha.  163.  See,  also,  Murray  v.  Flavcll,  25 
Ch.'  D.  89  ;  Dale  v.  Hamilton,  2  Ph.  266. 

(s)  Balmaiu  v.  Shore,  'J  Ves.  500. 


50S  PARTNERSHIP  ARTICLES. 

Bk.  III.  this  was  not,  technically  speaking,  a  power  of  appoint- 

Chap.  9.  Sect.  ment,  and  that  consequently  a  partner  could  bequeath 

J his  share  by  a  will  which  did  not   allude  either  to  the 

power  or  to  the  partnership  (a). 
Position  of  When  a  person  has  been   admitted  into  an   existing 

incoming  firm,  and  no  express  agreement  has  been  made  as  to 
partner.  kjs  rights  and  liabilities,  the  inference   is  that  as  be- 

tween themselves  his  position  is  the  same  as  that  of  the 
other  partners.  If  they  are  bound  by  existing  articles 
he  will  be  bound  by  the  same  articles,  if  his  conduct 
justifies  the  conclusion  that  he  has  assented  to  them  ;' 
and  if  any  special  agreement  is  made  with  him,  it  will 
be  regarded  as  incorporated  with  any  previous  agree- 
ment between  the  older  partners,  although  so  far  as  the 
two  agreements  may  be  inconsistent,  the  latest  will  pre- 
vail (6).  If,  indeed,  the  incoming  partner  has  no 
knowledge  of  any  prior  agreement  between  the  otbers, 
he  cannot  be  bound  thereby  (c);  for  nothing  that  he 
can  have  done  can  be  regarded,  under  these  circum- 
stances, as  evidence  of  any  assent  thereto  on  his  part  ; 
and  it  is  upon  such  presumed  assent  that  the  rule  in 
question  is  founded. 
16  Annuities  16.  Annuities  to  widows. — Sometimes  it  is  agreed 
to  widows,  that  if  a  partner  dies  the  survivor  shall  pay  an  annu- 
&c.  ity,  or  a  share  of  the  profits,  to  his  widow.      There  is 

now  no  difficulty  in  framing  a  clause  of  this  sort  with- 
out making  the  widow  a  partner  or  a  quasi-partner  by 
virtue  of  her  participation  in  profits  (cl);  and  after 
her  husband's  death  she  can  enforce  payment  of  the 
provision  intended  for  her  (e). 
Annuity  If  the  annuity  is  made  payable   out   of  the   profits, 

payable  out  anc\  the  business  is  carried  on  and  no  profits  are  made, 
of  profits  and  nQ  anuujty  will  be  payable.  So,  if  the  surviving  partner 
none  made.      .  \.        ,  •,,  •<  ■>  <? 

has  an  option  to  pay  either  an  annuity   or   a   share  or 

Harper  &         the  Pr°fits,.  and  there  should  be  no  profits,  he   will   not 

(a)  Ponton  v.  Dunn,  I  R.  &  M.  402.  See,  also,  Beamish  v. 
Beamish.  Ir..  Rep.  4  Eq.  120,  where  a  bequest  of  a  share  of  resi- 
due was  held  not  to  amount  to  a  nomination  of  a  successor. 

{!>)  See  Austen" v.  Bovs,  24  Beav.  598,  and  2  De.  G.  &  J.  626. 

(c)  Ibid. 

(d)  See,  as  to  this,  ante  p.  35. 

(e)  See  Murray  »..  Flavell,  25  Ch.  D.  S9  ;  Page  r.  Cox,  10  Ha. 
163,  ante,  p.  434. 

1  Mealier  v.  Cox,  37  Ala.  201  (1861).  Where  such  a  provision 
exists  and  the  children  of  a  deceased  partner,  being  sui  juris, 
drew  monthly  the  amount  to  which  their  father  was  entitled,  it 
was  held  that  they  had  accepted  his  successorship  and  were 
liable  to  creditors  as  members  of  the  firm.  Nave  v.  Sturges,  5 
Mo.  App.  557  (1S78). 


USUAL  CLAUSES.  509 

be  bound  to  pay  anything  ;  for,  exhypothesi,  it  is  com-  Bk.  III. 
petent  for  him  to  elect  to  pay  out  of  the  *  profits,  and  phaP-  9-  Sect. 

his  right  to  make  this  election  in  no  way  depends  on  J 

their  amount  (/).  Moreover,  in  construing  a  provi-  r*436] 
sion  giving  a  widow  of  a  deceased  partner  a  share  of 
the  profits,  the  partnership  which,  strictly  speaking, 
determined  when  her  husband  died,  is  regarded  as  con- 
tinuing, and  the  profits  which  she  is  to  share  must  be 
ascertained  on  that  principle.  They  ought  not  to  be 
calculated  as  if  the  returns  yielded  by  the  new  business 
had  not  to  be  applied  in  liquidating  the  demands  on 
the  old  firm  (g). 

In  Holyland  v.  De  Mendez  (/i)  a  continuing  partner  Annuity  pay- 
gave  a  bond  conditioned  to  be  void  on   payment  of  an  able  until 
annuity,  or  on  being  without  his  own  default  dispos-  eviction, 
sessed  of  the  partnership  property  assigned    to  him.  Holyland  v. 
It  was  held  that  the  annuity  did  not  cease  on  the  bank-  De  Mendez- 
ruptcy  of  the  continuing   partner  ;    dispossession    by 
his  assignees  not  being  such  a  dispossession  as  was  con- 
templated in  the  bond. 

An  agreement  to  pay  an   annuity  out  of  profits  in   Effect  of  dis- 
volves  an  obligation  not  wilfully  to  prevent  the  earning  continuing 
of  profits ;   and  if,  therefore,  the  person  who  has  to  pay  business, 
the  annuity  wilfully  ceases  to  carry  on  business  he  be- 
comes liable  to  an  action  for  damages   (i).      In  order, 
however,  to  provide  as  far  as  possible  against  any  at- 
tempt to  defeat  the  annuity  by  discontinuing  the  busi- 
ness, it   is   desirable  that  the  partner  continuing  the 
business  should  covenant  not  only  that  he  will  carry  on 
the  business  and  pay  the  annuity,  but  that  he  will  not 
transfer  the  business,  or  take  in  any  fresh  partner,  with- 
out procuring  from  the  transferee  or  new  partner  a  sim- 
ilar covenant  on  his  part  (k). 

17.  Prohibitions  against  carrying  on  business. — A  17.  Prohibi- 
subject  upon  which  it  is  always  desirable  to  make  some  tions  against 
express  agreement  is   the  extent  to  which  a  retiring  continuingin 

*■  OUSllltSS 

partner  shall  be  restrained  from  commencing  business 
on  his  own  account,  and  in  opposition  to  the  continuing 
partner.     In  the  absence  of  any  *  agreement  upon  the  r  *  437] 
subject,  a  retiring  partner  is  as  much  at  liberty  to  set 

(/)  Ex  parte  Harper,  1  De  G.  &  J.  180. 

(ff) Ibid. 

(h)  3  Mer.  184. 

(0  Mclutyre  v.  Belcher,  14  C.  B.  N.  S.  654.  Telegraph  Dis- 
patch Co.  «.* McLean,  8  Ch.  658.  Compare  Rhodes  v.  Forwood, 
1  App.  Ca.  256. 

(k)  A  purchaser  of  the  business  with  notice  of  such  a  covenant 
would  take  subject  to  it,  see  Werdennan  v.  Socict6  Geueralc  d' 
Electricity  19  Ch.  D.  246. 


J10 


PARTNERSHIP  ARTICLES. 


Bk.  III. 

Chap.  9.  Sect. 
2. 

Rule  where 
there  is  no 
prohibition. 


After  sale  of 
good-will. 


Agreement 
not  to  carry 

on  business 
enforced. 


Williams  v. 
"Williams. 


up  for  himself,  in  opposition  to  the  firm  he  has  quitted, 
as  he  would  be  if  he  had  never  belonged  to  it  ;  and  on 
a  general  dissolution  of  partnership,  all  the  partners 
are  at  liberty  to  commence  business  in  opposition  to 
each  other,  as  freely  as  if  they  had  never  been  part- 
ners, unless  they  have  entered  into  some  agreement  not 
to  do  so.  A  dissolution  per  se  obliges  no  partner  to  re- 
tire from  business,  or  to  refrain  from  seeking  a  liveli- 
hood in  the  manner  in  which  he  has  been  accustomed 
so  to  do,  and  in  the  neighborhood  where  he  is  known  (Z).1 

As  will  be  seen  presently,  even  a  sale  by  an  outgo- 
ing partner  of  all  his  interest  in  the  partnership  busi- 
ness, including  the  good- will  thereof,  does  not  preclude 
him  from  setting  up  a  new  business  in  opposition  to 
the  continuing  partners  ;  but  it  does  preclude  him  from 
so  doing  in  the  name  of  the  old  firm  and  from  repre- 
senting himself  as  continuing  the  business  sold  (m).2 
But  an  agreement  by  an  outgoing  partner  not  to  carry 
on  business  in  rivalry  with  his  late  co-partners  may 
be  implied  even  where  not  distinctly  expressed  (n). 

An  agreement  by  a  retiring  partner  not  to  commence 
business  in  opposition  to  his  late  partners,  will  be  en- 
forced, if  the  restriction  imposed  upon  him  is  not  un- 
limited, both  as  regards  time  and  distance,  and  is  not 
unreasonable,  having  regard  to  the  nature  of  the  part- 
nership business  (o).3  Thus,  in  Williams  v.  Williams  (p), 

(I)  See  Dawson  v.  Beeson,  22  Ch.  D.  504  ;  Farr  v.  Pearce,  3 
Madd.  78  ;  Davies  v.  Hodgson,  25  Beav.  177  ;  and  the  next  head, 
No.  18.  Goodwill. 

(in)  Churton  v.  Douglas,  Johns.  174,  noticed  infra,  p  441. 

in  |  Sec  infra,  p  442. 

(o)  See,  generally,  as  to  covenants  not  to  carry  on  business, 
Mitchell  v.  Reynolds,  1  Smith's  L.  C. ;  also  the  useful  table  ap- 
pended to  Avery  v.  Langford,  Kay,  663.  As  to  whether  such 
covenants  can  be  reasonable,  if  unlimited  both  as  to  time  and 
space,  see  Davies  v.  Davies,  36  Ch.  D.  359,  where  the  covenant 
was  unlimited  "so  far  as  the  law  allows.''  and  was  held  to  be 
too  uncertain  to  be  enforced,  and  also  to  be  personal  to  the  cove- 
nantees. In  Palmer  v.  Mallet,  36  Ch.  D.  411,  the  covenant  was 
joint  in  form,  but  was  held  to  be  joint  and  several  as  regards  the 
covenantees.  Distances  are  measured  as  the  crow  flies.  Duignan 
v.  Walker,  Johns.  446;  Mourlat  v.  Cole,  L.  R.  7  Ex.  70,  and  8 
Ex.  32.  (p)  2  Swanst,  253. 

1  See  Dayton  v.  Wilkes,  17  H.»av.  Pr.  510  (1859). 

2  MeCord  v.  Williams.  96  Pa.  St.  78  (1880);  Hoxie  v.  Chancy. 
143  Mass.  592  (1887);  White  v.  Jones,  1  Abb.  Pr.  (N.  S.)  328 
(1863);  Whiley  v.  Baumgartner,  97  Ind.  66  (1884). 

3  Such  an  agreement  must  be  reasonable  as  to  the  extent  of 
territory  covered  by  its  prohibition.  There  must  be  some  limit- 
ation in  this  respect.  Wiley  v.  Baumgardner.  97  Ind.  66  (1884); 
what  amounts  to  a  reasonable  territorial  restriction  depends  on 
the  nature  and  circumstances  of  the  business.     Oregon  Steam 


USUAL  CLAUSES.  511 

the  defendant,  who  had  been  in  partnership  *  with  the  [  *  438] 
plaintiffs,   in    running  coaches    between   Reading    and  Bk.  III. 
London,  sold   his  share  in  the  business   to  them,  and  Chap.  9.  Sect. 

covenanted  not  to  run  any  coach  between  Heading  and  J 

London,  or  so  as  to  injure  the  business  of  the  plaintiffs  ; 
and  this  covenant  was  enforced  in  equity.  So,  in 
Tallis  v.  Tallis  (q),  the  Court  of  Queen's  Bench  upheld  Tallis  v. 
a  covenant  entered  by  a  retiring  member  of  a  firm  of  Tams- 
booksellers  not  to  carry  on  the  canvassing  trade  in 
London,  nor  within  150  miles  of  the  General  Post- 
Offiae,  nor  in,  nor  within  fifty  miles  of  Dublin  or  Edin- 
burgh, nor  in  any  town  in  Great  Britain  or  Ireland  in 
which  the  continuing  partner  or  his  successors  might  at 
the  time  have  an  establishment. 

An   agreement  entered   into  when  a   partnership  is  Considera- 
formed,  to  the  effect  that  a  retiring  partner  shall  not tion- 
carry  on  the  business  carried  on  by  the  firm,  cannot  be 
invalid  for  want  of  consideration  (r). 

An  agreement  with  a  bankrupt  to  take  his  son  into 
partnership,  and  to  employ  the  bankrupt,  is  a  sufficient 
consideration  for  an  agreement  by  him  not  to  carry  on 
business  in  competition  with  the  firm  (s). 

In  framing  articles  of  partnership  between  solicitors,  Solicitors' 
provision  should  always  be  made  respecting  the  deeds  papers,  &c„ 
and  documents  in  their  possession,  but  belonging  to 
their  clients. 

It  need  hardly  be  observed  that  no  agreement  which 
the  solicitors  may  make  between  themselves,  will  pre- 
judice their  clients.  Subject  to  any  question  of  lien; 
the  clients  are  entitled  to  have  their  deeds  and  docu- 
ments, and  all  drafts  and  copies  thereof,  paid  for  by 
them,  delivered  up  on  request  (/).  They  have,  more- 
over, a  right  to  the  joint  assistance  of  all  the  members 
of  the  firm  employed  by  them  ;  and  although,  if  the 
firm  is  dissolved,  a  client  cannot  insist  that  the  part- 
ners shall  continue  to  act  as  his  solicitors,  it  is  clear 
that  they  cannot  without  his  consent,  turn  him  over  to 

{q)  1  E  &  B.  391.  See,  too,  Atkyns  v.  Kinnier,  4  Ex.  770  ; 
Keynolds  v.  Bridge.  6  E.  &  B.  528. 

(/•)  Per  Lord  Cranworth.  in  Austen  v.  Boys,  2  De  G.  &  J.  626. 
(s)  Clarkson  v.  Edge,  33  Beav.  227. 
(t)  Expartc  Horsfall,  7  B.  &  C.  528. 

Nav.  Co.  v.  Winsor,  20  Wall.  04  (1873);  Warfield  v.  Booth,  33 
Md.  63  (1870).  .Mr.  Bates  thinks  that  a  restriction  as  to  time  is 
unnecessary  and  cites  anion*;  others  the  following  cases  in  which 
none  occurred. :  Dean  v.  Emerson,  102  Mass.  480  (1869):  Ropes 
v.  Upton,  125  id.  25-<  (1878);  Stewart  v.  Bedell,  7!)  Pa.  St.  :;:;<; 
(1875);  Thayer  v.  Younge,  86  Ind.  259  1 1882  ;  Arnold  v.  Kreutzer, 
67  Iowa,  214  (18tioj.     Bates  on  Partnerships,  £  070. 


512  PARTNERSHIP  ARTICLES. 

[  *  439]        one  of  themselves  (w);  *  nor   act  against  bim  as  if  he 
Ek.  III.  had  never  been  a  client  (x).      The  dissolution  operates 

Chap,  9.  Sect.  as  a  discharge  of   the  client   by  the  solicitors  ;  and  the 

1 client  is  thereupon  entitled,  subject  to  any  question  of 

lien,   to  have    his   deeds  and  oapers  delivered  up    to 
him  (y). 

But  as  between  the  solicitors  themselves,  it  is  compe- 
tent for  them  to  agree  that,  if  they  dissolve  partnership, 
the  clients  of  the  old  tirm,  and  all  their  deeds  and 
papers,  shall  be  divided  amongst  the  partners,  or  be- 
long solely  to  the  partner  who  continues  to  carry  on 
the  business  of  the  firm  ;  and  such  an  agreement  will 
be  enforced  (z).  If  no  such  agreement  is  come  to,  each 
partner  may,  after  a  dissolution,  3o  his  best  tc  induce 
the  old  clients  to  continue  him  as  their  sole  solicitor. 
18.  Good-  18.    Good-will. — In  connection  with  the  subject  con- 

will,  sidered  under  the  last  head,  it  is  necessary  to  allude  to 

the  good-will  of  a  trade  or  business. 
Nature  of  The  term  good- will  can  hardly  be  said  to  have   any 

good-will.  precise  signification.  It  is  generally  used  to  denote  the 
benefit  arising  from  connection  and  reputation  ;  and 
its  value  is  what  can  be  got  for  the  chance  of  being 
able  to  keep  that  connection  and  improve  it.  Upon  the 
sale  of  an  established  business  its  good-will  has  a 
marketable  value,  whether  the  business  is  that  of  a 
professional  man  or  of  any  other  person  (a).1  But  it  is 
plain  that  good-will  has  no  meaning  except  in  connec- 
tion with  a  continuing  business  (6)  ;  it  may  have  no 
value  except  in  connection  with  a  particular  house,  and 
may  be  so  inseparably  connected  with  it  as  to  pass  with 
it  under  a  will  or  deed  without  being  specially  men- 
[  *  440]        tioned  (c).2     In  such  a  case  the  *  good-will  increases 

(u)  Cook  v.  Rhodes,  19  Ves.  272.  note. 

(x)  Cholniondely  v.  Clinton.  19  Yes.  261. 

(y)  Griffiths  v.  Griffiths,  2  Ha,  587  ;  Colegrave  v.  Manley,  T. 
&  E.  400 ;  and  see  Vaughau  v.  Yanderstegen,  2  Drew.  409  ;  and 
ante,  p.  120. 

(z)  Whittaker  v.  Howe,  3  Eeav.  383.  See,  however,  Davidson 
v.  Napier,  1  Sim.  297. 

(a)  Good-will  is  property  within  the  meaning  of  the  stamp 
acts,  Potter  v.  The  Commissioner  of  the  Inland  Revenue,  10 
Ex.  147. 

(6)  See.  as  to  legacy  of  good-will,  apart  from  any  share  in  a 
business,  Robertson  v.  Quiddington,  28  Beav.  529. 

(c)  As  to  Blake  v.   Shaw,   Johns.   732;  Chissum  v.   Dewes,  5 

1  The  transfer  of  the  good-will  of  a  business  is  consideration 
sufficient  to  support  a  note  given  for  the  price  of  it.  although  the 
business  may  afterwards  amount  to  nothing.  Smock  v.  Pierson, 
68  Ind.  405  (1879). 

2  Thackray's  Appeal,  75  Pa.  St.  132  (1874). 


USUAL  CLAUSES.  513 

the  value  of  the  house  ;  but  the  value  of  the  good-will  Bk.  III. 

of  any  business  to  a  purchaser   depends,  in  some  cases  Chap-  9.  Sect. 

entirely,  and  in  all  very  much,  on  the  absence  of  com-  J ' 

petition  on  the  part  of  those  by  whom  the  business  has 
been  previously  carried  on. 

Now  it  has  just  been  seen  that  there  is  no  obligation 
on  the  part  of  any  of  the  partners  to  retire  from  busi- 
ness merely  because  the  partnership  between  them  is 
dissolved. 

Further,  it  is  held,  although  it  is  certainly  an   extra-  Carrying  on 
ordinary  doctrine,  that  if  a  person  sells   the   good-will  business 
of  his  trade  or  business,  that  does    not  disentitle  him  P,fter  seiUng 
from  recommencing  a  similar  trade  or   business   in  the  '  ' 
immediate  vicinity  of  the  place  where  the  old  one  was 
carried  on  (d)  ;'   and,  therefore,  if  it  is   simply  agreed 
that  a  partnership  shall  be  dissolved,  and  that  one  part- 
ner shall  buy  the  other  out,  and  this  agreement  is  car- 
ried into  effect,  the  retiring  partner  will  nevertheless  be 
at  liberty  to  recommence   business   in  the  old   line   in 
the  old  neighbourhood  (e)  ;  and  he   may  not  only  ad- 
vertise the  fact  (/),  but  he  may  also   solicit  business 
from,  and  carry  on   business   with,  the   old   customers 
and  correspondents  of  the  firm  (g).     But  he  must  not 
hold  himself  out  as  continuing  the  business  which   he 
has  sold,  and  must  not  therefore  carry  it  on  in  the  name 
in  which  it  was  carried  on  before  he  sold  it   (h).     At 

Russ.  29;  Ex  parte  Punnett,  16  Ch.  D.  226;  Pile«».  Pile.  3  Ch.  D. 
36;  and  see  per  Cotton.  L.  J.,  in  Cooper  v.  Met.  Board  of  Works, 
25  Ch,  D.  479. 

(d)  Cruttwell  v.  Lye,  17  Ves.  335;  Harrison  v.  Gardner,  2  Madd. 
198;  Kennedyu  LeeJ  3  Mer.  455;  Shackle  v.  Baker,  14  Ves.  468. 
See,  too,  Davies  v.  Hodgson,  25  Beav.  177,  and  Churton  v.  Doug- 
las, Johns.  174,  In  Johnson  v.  Hellely,  34  Beav.  63,  notice  of 
this  right  was  directed  by  the  Court  to  be  given  in  the  particu- 
lars of  the  sale  of  the  good-will. 

(c)  See  Kennedy  v.  Lee,  3  Mer.  452;  Mellersh  v.  Keen,  27 
Beav.  236;  Bradbury  v.  Dickens,  ib.  53;  Smith  v.  Everett,  ib. 
446,  and  the  next  note. 

(/)  Hookhani  v.  Pottage,  8  Ch.  91;  Labouchere  v.  Dawson.  13 
Eq.  322,  and  see  Cruttwell  v.  Lye,  17  Ves.  335. 

(g)  Pearson  v.  Pearson,  27  Ch.  D.  145;  Vernon  v.  Hallam,  34 
ib.  748,  overruling,  as  to  this,  Labouchere  v.  Dawson,  13  Eq.  322; 
Ginesi  v.  Cooper  &  Co.,  14  Ch.  D.  596;  and  Leggott  v.  Barrett, 
15  Ch.  D.  306.  N.B.— The  order  against  soliciting  the  old  cus- 
tomers was  not  appealed  against  in  this  last  case.  See,  also, 
Walker  v.  Mottram,  19  Ch.  D.  355;  Dawson  v.  Beeson,  22  ib. 504. 

(h)  Churton  v.  Douglas,  Johns.  174;  Hookhani  v.  Pottage,  8 
Ch.  91,  where  the  defendant  described  himself  as  P.  from  H.  & 
P.,  tlie  old  firm,  but  in  a  way  calculated  to  deceive. 


1  McCord  v.  Williams,  96  Pa.  St.  78  (1880);  Hoxie  v.  Chaney,  143 
Mass.  592  (1887);  Porter  v.  Gorman,  65  Ga.  11  (1880). 

*  10   LAW   OF   PARTNERSHIP. 


514  PARTNERSHIP  .ARTICLES. 

Bk.  III.  the  same  time,  if  that  name  happens  to  be  his  own,  it 

Chap.  9.  Sect.  -g  ^  no  *  means  dear  that  he  could  be  restrained  from 

.1 .  carrying  on  business  in  that  name  (i). 

[  *  441 J  The  last  propositions  aie  well  illustrated  by  the  im- 

^  rt]on  v-  portant  case  of  Churton  v.  Douglas  (k).  There  two  of 
the  plaintiffs,  and  the  defendant,  whose  name  was  John 
Douglas,  carried  on  business  in  partnership  under  the 
firm  of  John  Douglas  &  Co.,  as  stuff  merchants  at 
Bradford.  The  defendant  retired  from  the  firm;  a  new 
partner  was  taken  in;  and  the  defendant  assigned  to 
his  old  partners  and  their  new  partner  (being  the  plain- 
tiffs) all  his,  the  defendant's,  share  and  interest  in  the 
old  firm,  and  in  the  good-will  thereof.  The  plaintiffs 
continued  to  carry  on  the  old  business  under  a  new 
name,  with  the  addition  late  John  Douglas  &  Co.  The 
defendant  formed  a  new  partnership  with  three  persons 
who  had  been  in  the  employ  of  the  old  firm,  and  whom 
he  had  enticed  to  leave  the  service  of  its  successors  and 
to  join  him;  and  he  and  his  new  partners  commenced 
business  as  stuff  merchants  at  Bradford,  in  a  house  ad- 
joining the  place  of  business  of  the  old  firm;  and  they 
did  so  in  the  name  of  John  Douglas  &  Co.  They  further 
affixed  that  name  to  the  house  they  had  taken,  and  sent 
circulars  to  the  old  customers  of  the  old  firm,  so  as  to 
lead  them  to  suppose  that  the  business  of  that  firm  was 
being  continued  by  the  defendant  and  his  new  partners. 
On  a  bill  filed  by  the  plaintiffs  against  the  defendant  it 
was  held,  (1),  that  he  was  entitled  to  carry  on,  by  him- 
self or  in  partnership  with  others,  the  kind  of  business 
previously  carried  on  by  him  with  his  late  partners; 
and,  (2),  that  he  was  entitled  so  to  do  in  the  immediate 
neighbourhood  of  the  place  where  he  and  his  late  part- 
ners previously  carried  on  their  business.  But  it  was 
also  held,  (3),  that  the  plaintiffs  alone  had  the  right  to 
carry  on  the  business  previously  carried  on  by  John 
Douglas  &  Co. ;  (4),  that  the  plaintiffs  had  the  right 
to  represent  themselves  as  the  successors  of  that  firm; 
(5),  that  the  defendant  had  no  right  to  represent  him- 
self as  its  successor;  (6),  that  he  could  not  acquire  such 
a  right  by  taking  other  persons  into  partnership  with 
him;  and,  (7),  that  although  his  name  was  John  Doug- 
las, he  had  not,  either  alone  or  in  partnership  with 
I"  *  442]  others,  the  *  right  to  carry  on  the  old  kind  of  business, 
in  the  old  place,  under  the  old  name  of  John  Douglas 
&  Co.  An  injunction  was  granted  accordingly  to  re- 
strain the  defendant  from  carrying  on  the  business  of  a 

(?)  See  ib.  and  ante,  book  i.  ch.  6,  \  2. 
(k)  Johus.  174. 


USUAL  CLAUSES.  515 

stuff  merchant,  at  or  in   the  immediate  neighbourhood  Bk.  Til. 

of  Bradford,  either  alone  or  in  partnership  under  the  Chal'-  9- Sect 

style  John  Douglas  &  Co.,  or  in  any  other  manner  hold-  Z. 

ing  out  that  he  was  carrying  on  the  business  of  a  stuff 
merchant  in  continuation  of,  or  in  succession  to,  the 
business  carried  on  by  the  late  firm  of  John  Douglas 
&Co. 

An  agreement  by  a  partner  that  he  will  not  carry  on  implied 
business  in  opposition  to  his  late  co-partners  may  how-  agreement 
ever  be  implied  from  some  other  agreement  into  which  u.ot  to .con- 
he  and  they  have  entered.     Thus  where  two  persons  Jjn-e  in 
became  partners  as  brewers  for  eleven  years,  and  it  was  c     (      ' 
provided   in  the  articles  that  either  of  the  parties,  on  Watson? 
giving  six  months'   notice  to  the  other,  should  be  at 
liberty  to  quit  the  trade  and  mystery  of  the  brewer,  and 
that  the  other  should  be  at  liberty  to  continue  the  trade 
on  his  own  account;  it  was  held  that  one  of  the  part- 
ners who  had  retired  from  the  firm  after  giving  notice 
to  the  other  was  not  at  liberty  to  continue  in  the  trade 
at  all  (I). 

Again,  where  on   the  retirement  of  a  partner,  it  was  Award  dis- 
left  to  an  arbitrator  to  determine  what  the  continuing  posing  of 
partner  should  pay  for  the  good-will,  and  the  arbitrator  business- 
fixed  a  sum  upon  the  understanding  that  the  retiring  ?arVs')n  "' 
partner   would  not  commence  a   new  business  in   the 
same  street  in  which  the  old  one  was  carried  on;  an  in- 
junction was  granted  restraining  the  retiring  partner 
from  carrying  on  business  in  that  street,  although  the 
award  itself  was  silent  upon  the  point  (m). 

It  follows  from  the  foregoing  observations  that  the 
good- will  of  a  valuable  partnership  business  may  be 
practically  unsaleable  and  worthless,  at  least  to  any  one 
except  a  former  partner  desiring  to  continue  the  busi- 
ness of  the  firm  (»).  It  is  only  so  far  as  good-will  has 
a  saleable  value  that  it  can  be  regarded  as  an  asset  of 
any  partnership;  and  the  good- will  of  *a  business  is  [*443] 
frequently  of  no  value  at  all,  except  in  connection  with 
the  place  of  business  (o).  This,  however,  is  by  no 
means  always  the  case.  The  value  of  the  good- will  of 
a  newspaper,  for  example,  attaches  to  its  name,  and  is 
scarcely,  if  at  all,  deperjdent  on  the  place  of  publica- 
tion. 

(?)  Cooper  v.  Watson,  3  Dougl.  413;  S.  C.  sub  nomine  Cooper 
v.  Watlington.  2  Chitty,  451.  Compare  Davies  v.  Davies.  36'  Ch. 
D.  359,  ante,  p.  437,  note  (o). 

(m)  Harrison  v.  Gardner,  2  Madd.  198. 

(«)  See  Davies  v.  Hodgson,  25  Beav.  177,  where  the  good-will 
was  treated  as  valueless  on  this  very  ground. 

(o)  .As  in  Blake  v.  Shaw,  Johns.  732.     See  ante,  p.  439,  note  (c). 


516 


PARTNERSHIP  ARTICLES. 


Bk.  III. 
Chap.  9.  Sect. 
2. 

Good-will 
assets  of  the 
firm. 


Good-will  in 
cases  of 
death. 


[*444] 


The  saleable  value  of  the  good-will  of  a  pai'tnership 
business,  whatever  that  value  may  be,  must  be  consid- 
ered as  belonging  to  the  firm,  unless  there  is  some 
agreement  to  the  contrary;  and  it  follows  from  this — 

1.  That  if  a  firm  is  dissolved,  and  there  is  no  agree- 
ment to  the  contrary,  the  good- will  must  be  sold  for 
the  benefit  of  all  the  partners,  if  any  of  them  insist  on 
such  sale  (p) ; 

2.  That,  so  far  as  is  possible,  having  regard  to  the 
right  of  every  partner  to  carry  on  business  himself,  the 
Court  will,  on  a  dissolution,  interfere  to  protect  and 
preserve  the  good-will  until  it  can  be  sold  (q); 

3.  That  if  a  partner  has  himself  obtained  the  bene- 
fit of  the  good-will,  he  can  be  compelled  to  account  for 
its  value,  i.e.,  for  what  it  would  have  sold  for,  he  be- 
ing himself  at  liberty  to  compete  in  business  with  the 
purchaser  (r). 

In  the  event  of  dissolution  by  death,  it  has  been  said 
that  the  good- will  survives,  and  there  is  a  clear  deci- 
sion to  this  effect  (s).  But  this  is  not  in  accordance 
with  modern  authorities;  they  are  wholly  opposed  to 
the  notion  that  the  value  of  the  good- will,  as  such,  be- 
longs to  the  survivor  (t).1  It  undoubtedly  may  hap- 
pen that  the  survivor  may  obtain  the  benefit  of  the 
good- will  without  paying  for  it;  for  he  is  at  liberty 
*  (unless  restrained  by  agreement)  to  carry  on  busi- 
ness on  his  own  account  (u),  and  possibly  in  the  old 
place  of  business  and  in  the  name  of  the  late  firm  (x).'2 
Under  these  circumstances,  if,  on  the  death  of  a  part- 
ner, the  good-will  is  put  up  for  sale,  it  will  produce 

(p)  Pawsey  v.  Armstrong,  18  Ch.  D.  698;  Bradbury  v.  Dick- 
ens, 27  Beav.  53,  and  the  cases  cited  infra. 

(q)  See  Turner  v.  Major,  3  Giff.  442,  where,  however,  there 
was  an  express  agreement  for  the  sale  of  the  good-will.  In 
Lewis  v.  Langdon,  7  Sim.  425,  the  V.-C.  Shadwell  seemed  to 
think  that  a  surviving  partner  was  under  no  obligation  to  pre- 
serve the  good-will.  But  his  opinion  was  probably  influenced 
by  Hammond  v.  Douglas,  5  Ves.  539.  which  was  not  then  over- 
ruled. 

(»•)  Smith  v.  Everett,  27  Beav.  446;  Mellersh  v.  Keen,  ib.  236, 
and  28  Beav.  453. 

(.s)  Hammond  v.  Douglas,  5  Ves.  539. 

(0  Wedderburn  v.  AVedderburn.  22  Beav.  104;  Smith  v.  Ever- 
ett, 27  Beav.  446,  and  Mellersh  v.  Keen,  ib.  236,  and  28  Beav. 
453.  See.  also,  Gibblett  v.  Read,  9  Mod.  459,  a  case  of  a  news- 
paper. 

(m)  Farr  v.  Pearce,  3  Madd.  74;  Da  vies  v.  Hodgson,  25  Beav 
177. 

(x)  See,  as  to  this,  infra,  note  (e). 

1  Holden  v.  McMakin,  1  Pars.  Sel.  Cas.  (Pa.)  270  (1847). 

2  Kammelsberg  v.  Mitchell,  29  Oh.  St.  22  (1875). 


USUAL  CLAUSES.  517 

nothing  if  it  is  known  that  the  surviving  partner  will  Bk.  III. 
exercise  his  rights.     He  will  therefore  acquire  all  the  Chap.  'J.  Sect. 

benefit  of  the  good-will;  but  he  does  not  acquire  it  by  J 

survivorship,  as  something  belonging  to  him  exclu- 
sively, and  with  which  the  executors  of  the  deceased 
partner  have  no  concern;  for  if  he  did,  he  might  sell 
the  good-will  for  his  own  benefit,  and  this  he  cannot 
do  (y).  When,  therefore,  it  is  said  that  on  the  death 
of  one  partner  the  good-will  of  the  firm  survives  to  the 
other,  what  is  meant  is,  that  the  survivor  is  entitled  to 
all  the  advantages  incidental  to  his  former  connection 
with  the  firm,  and  that  he  is  under  no  obligation,  in 
order  to  render  those  advantages  saleable,  to  retire 
from  business  himself  (z). 

Again,  when  a  partner  retires  not  only  from  the  firm,  Good-will  in 
but  from  the  business  carried  on  by  it,  the  continuing  case  of  re- 
partners   will   acquire  the    benefit   arising  out   of   the  tireroent  of 
good-will  for  nothing,  unless  it  has   been  agreed  that  one  ljartner- 
they  shall  pay  for  it;  for  they  retain  possession  of  the 
old  place  of  business,  and  they  continue  to  carry  on 
that  business  under  the  old  name.     This,  in  fact,  se- 
cures the  good-will  to  them,  and  they  cannot  be  com- 
pelled to  pay  separately  for  it,  unless  some  agreement 
to  that  effect  has  been  entered  into  (a). 

The  right  to  continue  the  use  of  a  partnership  name  Good-will  in 
is  frequently  the  most  important  element  in  the  good-  connection 
will,  and  is  governed  by  principles  similar  to  those  ap-  with  use  of 
plicable  to  it.     The  *  purchaser  of  the  good- will  of  a03^'-. 
business  acquires  the  right  not  only  to  represent  him-  L  -• 

self  as  the  successor  of  those  who  formerly  carried  it 
on  (6),  but  also  to  use  the  old  name  (c)  and  to  pre- 
vent other  persons  from  doing  the  like  (d).  If  then 
the  good-will  of  a  partnership  business  has  any  saleable 
value  at  all,  it  seems  impossible  to  hold  that  on  a  dis- 
solution of  a  partnership,  whether  by  death  or  other- 

(y)  See  Smith  r.  Everett,  27  Beav.  446;  Mellersh  v.  Keen,  ib. 
236,  and  28  ib.  453;  Wedderburn  v.  Wedderburn,  22  Beav.  104. 
See,  however,  Farr  v.  Pearce,  3  Madd.  74,  and  Hammond  v. 
Douglas,  5  Ves.  539,  contra.  The  last  case  cannot  be  regarded 
as  now  law. 

(z)  See  Farr  v.  Pearce,  3  Madd.  74;  Davies  v.  Hodgson,  25 
Beav.  177;  Mellersh  v.  Keen,  27  Beav.  236,  and  28  ib.  45:;. 

(a)  See  infra.  An  agreement  to  pay  out  a  retiring  partner 
the  value  of  his  share,  as  shown  by  the  last  annual  account,  does 
not  entitle  him  to  have  the  goodwill  valued,  Stewart  v.  Glad- 
stone, 10  Ch.  D.  626.  Compare  Wade  v.  Jenkins,  2  Giff.  509, 
infra,  p.  448. 

(b)  Churton  v.  Douglas,  Johns.  174,  ante,  p.  441. 

(c)  Levy  v.  Walker,  10  Ch.  D.  436. 

(d)  See  the  last  two  notes. 


518  PARTNERSHIP  ARTICLES. 

Bk.  III.  wise,  any  partner  can  continue  the  old  business  in  the 

Chap.  9.  Sect.  0]^   name  for  his   own   benefit,  unless    there  is  some 

J agreement  to  that  effect,  or  at  least  to  the  effect  that 

the  assets  are  not  to  be  sold.     Such  a  right  on  his  part 
is  inconsistent  with  the  right  of  the  other  partners  to 
have  the  good -will  sold  for  the  common  benefit  of  all. 
There  are,  however,  authorities  tending  to  show  that, 
•  in  the  case  of  death,  the  surviving  partners  are  enti- 
tled   to    continue    to   carry  on  business    in    the  old 
name  (e),  and  to  restrain  the  executors  of  the  deceased 
partner  from  doing  the   like  (/).     But  if  these  cases 
are  carefully  examined,  they  will  be  found  scarcely  to 
Webster  v.      warrant  so  general  a  proposition.     In  Webster  v.  Web- 
Webster.         sfer  (g^  ^he  executors  of  a  deceased  partner  sought   to 
restrain  the  surviving  partners  from  carrying  on   busi- 
ness in  the  name  of  the  old  firm;    but  the   application 
was  based  upon  the  untenable  ground  that  by  so  doing 
the  surviving  partners  exposed  the  estate  of  the  de- 
ceased partner  to  continued  liability.     No  question  of 
Lewis  v.  good-will  appears  to  have  been  in  dispute.     In  Lewis  v. 

Langdon.  Langdon  (h),  the  V. -C.  Shadwell  certainly  intimated 
his  opinion  to  be,  that  surviving  partners  had  a  right  to 
continue  to  carry  on  business  in  the  old  name  (i);  but 
the  real  question  there  was,  whether  the  executors  of  a 
deceased  partner  were  entitled  to  continue  the  use  of  that 
name;  and  it  was  held  that  they  were  not,  which  is 
quite  consistent  with  the  absence  of  the  same  right  on 
the  part  of  the  surviving  partner.  There  seems,  more- 
[  *4461  over,  to  have  been  some  agreement  *  not  set  out  in  the 
report  (A;),  which  influenced  the  judge's  decision;  and 
at  the  time  it  was  pronounced  the  doctrine  that  good- 
will is,  if  saleable,  a  partnership  asset,  was  not  so  well 
established  as  it  is  at  present.1 

(e)  Webster  v.  Webster,  3  Swanst.  490;  Lewis  v.  Langdou,  7 
Sim.  421 ;  Robertson  v.  Qniddington,  28  Beav.  536;  Banks  v. 
Gibson,  34  Beav.  566. 

(/)  Lewis  v.  Langdon,  7  Sim.  421. 

(g)  3  Swanst.  490. 

(*)  7  Sim.  421. 

{i)  See,  too,  per  Lord  Romilly,  in  28  Beav.  536. 

(k)  See  the  last  line  in  7  Sim.  425. 

1  In  Iowa  Seed  Co.  v.  Dorr  (Iowa),  30  N.  W.  Rep.  866  (1886), the 
business  had  been  carried  on  under  a  firm  name  identical  with 
that  of  one  of  the  partners,  and  the  seeds  sold  in  packages 
marked  with  that  name  had  acquired  considerable  reputation. 
This  firm  failed  and  the  assignee  for  the  benefit  of  its  creditors 
sold  its  good-will.  The  partner,  whose  name  had  become  identi- 
fied with  the  old  business,  started  in  the  same  line  of  business 
again,  using  his  own  name.  The  court  refused  to  prevent  this . 
at  the  instance  of  the  purchaser  of  the  good-will. 


USUAL  CLAUSES.  519 

In  considering  this  question,  the  right  of  a  late  part-  Bk.  III. 
ner  not  to  be  exposed  to  risk  by  having  his  name   con  •  Chap.  9.  Sect. 

tinued  in  a  business  must  not  be  forgotten  (I) ;  and  11 . 

where  his  name  is  part  of  the  name  of  the  firm  e.  g.,  if  Continued 
his  name  is  A.  B.,  and  the  name  of  the  firm  is  A.  B.  &  Co.,  use  ot  name 
so  long  as  he  lives  he  would,  it  is   apprehended,  in  the  on  one"oftwo 
absence  of  an  agreement  to  the  contrary,  be  entitled  to  grounds. 
restrain  his  late  co-partners  and  their  representatives 
from  carrying  on  business  under  the  old   name,  and  so 
continually  exposing  him  to  risk.1     But  a  sale  by  him 
of  his  interest  in  the  good  will  includes  the  right  to  use 
the  old  name  even  if  it  is  his  own  (m).     The  right  of  a 
late  partner  to  prevent  the  continued  use  of    his  own 
name  on  the  ground  of  exposing  him  to  risk  is  a  purely 
personal  right,  and  does  not  devolve  either  on  his   ex- 
ecutors or  on  his  trustee  in  bankruptcy,  for  they  would 
not  be  exposed  to  risk.2     Their  right,  and  indeed  the 
right  of  any  partner  whose  name  does  not  appear  in  the 
name  of  the  firm,  to  prevent  the  continuance  of  the  use 
of  the  name  of  the  firm,  can  only  be  maintained  upon 
the  ground  that  such  right  is  involved  in  th«  more  gen- 
eral right  of  having  the  partnership  assets,  including 
the  good-will,  sold  for  the  common  benefit.     And  if 
upon  a  dissolution  this  right  is  waived,  or  if  the  terms 
of  dissolution    are    such    as  to   preclude   its  exercise, 
then  each  partner  can  not  only  carry  on  business  in 
competition    with  the  others,   but  each  can   represent 
himself  as  late  of,  or  as  successor  to,  the  old  firm  :   and 
each  may  use  the  old  name  without  qualification   (n); 
at  all  events  if  he  does  *  not  hold  out  the  other  partners  [  *  447] 
as  still  in  partnership  with  himself  (o), 

The  use  of  a  partnership  trade  mark  is  another  very  Good-will  in 

important  element  in  the  good-will  of  its  business.     A  connectlon 
.  "\vitii  trucic 

partnership  trade  mark  is   an  asset  of  the  firm,  salea-  marks. 

(?)  See  Routh  v.  Webster,  10  Beav.  561  ;  Bullock  v.  Chapman, 
2  De  G.  &  Sin.  211  ;  Troughton  v.  Hunter,  18  Beav.  470.  See, 
also,  Hodges  v.  London  Trams  Omnibus  Co.,   12  Q.  B.  D.  105. 

(m)  Levy  v.  Walker,  10  Ch.  D.  436  ;  Banks  v.  Gibson,  34  Beav. 
566.  Note  in  the  first  of  these,  Miss  Charbonnel  having  married 
and  changed  her  name,  was  not  in  fact  held  out  as  a  partner. 

(n)  See  Banks?-.  Gibson,  34  Beav.  566,  and  the  cases  cited  in 
the  last  four  notes.  See,  as  to  describing  oneself  as  late  with 
or  from  another,  Glenny  i\  Smith,  2  Dr.  &  Sin.  476. 

(o)  Even  this  qualification  is  doubtful.  See  Levy  v.  Walker, 
10  Ch.  D.  436. 


1  Morgan  v.  Schuyler,  79  N.   Y.  490  (1880);  McGowan  Bros. 
Pump  &  Mach.  Co.  k.  McGowan,  22  Oh.  St.  370  (1872). 
''Staats  v.  Howlett,  4  Den.  559  (1847). 


520 


PARTNERSHIP  ARTICLES. 


Bk.  III. 

Chap.  9.  Sect. 
2. 

Valuation  of 
good- will. 
Agreements 
as  to  paying 
for  good-will 
on  retire- 
ment, &c. 


Austen  v. 
Boys. 

[*448] 


ble  on  a  dissolution  like  any  other  asset  (p).1  The 
partnership  name  may  be  a  trade  mark  (q)2 

Good-will  is  generally  valued  at  so  many  years'  pur- 
chase on  the  amount  of  profits. 

In  framing  articles  of  partnership,  too  great  care 
cannot  be  taken  to  express  as  clearly  as  possible  what 
is  intended  to  be  done  with  respect  to  good- will;  and 
in  order  to  avoid  all  ambiguity,  the  word  itself  should 
be  made  use  of.  There  are  cases  which  show  that  an 
agreement  to  take  a  retiring  partner's  share  in  the 
property  and  effects  of  the  partnership  (r),  or  in  the 
partnership  premises  (s),  do  not  entitle  him  to  any- 
thing in  respect  of  good-will.  But  in  another  case  a 
clause  authorizing  a  surviving  partner  to  take  the  stock 
of  the  partnership  at  a  valuation  was  held  to  entitle 
the  executors  of  a  deceased  partner  to  a  share  of  the 
value  of  the  good-will  of  the  partnership,  and  of  a 
trade-mark  belonging  to  it  (t). 

When  an  agreement  is  entered  into,  to  the  effect  that 
a  retiring  partner  shall  be  entitled  to  be  paid  for  his 
interest  in  the  good  will  of  the  firm,  it  is  material  to 
determine  whether  the  firm  is  to  be  regarded  as  of  defi- 
nite or  of  indefinite  duration.  For  upon  this  will  de- 
pend the  amount  to  be  paid  to  the  retiring  partner. 

In  Austen  v.  Boys  (u),  a  partnership  was  entered 
into  for  seven  years,  with  power  for  any  partner  to  re- 
tire. In  case  of  *  retirement  the  retiring  partner  was 
to  be  paid  by  the  continuing  partners  the  fair  market 
value  of  his  interest  and  share  in  the  partnership  busi- 
ness, and  in  the  good-will  thereof.  Two  days  before 
the  expiration  of  the  seven  years,  one  of  the  partners 
retired,  and  the  question'arose,  whether  in  ascertaining 
the  value  of  his  interest  in  the  good-will  of  the  busi- 
ness, the  partnership  business  was  to  be  considered  as 

(p)  See  Bury  v.  Bedford,  4  De  G.  J.  &  Sm.  352  ;  Hall  v.  Bar- 
rows, 4  De  G.  J.  &  Sm.  150.  Trade  marks  registered  under  46 
&  47  Viet.  c.  57,  #  70,  are  only  assignable  with  the  good-will  of 
the  business,  see  Welleome's  Trade  mark.  32  Ch.  D.  213. 

(g)  46  &  47  Vict.  c.  57.  \  64.     See  ante,  book  i.  ch.  6,  £  2. 

(r)  See  Hall  v.  Hall,  20  Beav.  139  ;  Kennedy  v.  Lee,  3  Mer. 
452. 

(s)  Burfiekl  v.  Rouch,  31  Beav.  241.  Compare  Blake  v.  Shaw, 
Johns.  732. 

(t)  Hall  v.  Barrows,  4  De  G.  J.  &  Sm.  150. 

(m)  24  Beav.  598,  affirmed  2  De  G.  &  J.   626. 

1  If  undisposed  of  at  dissolution,  each  partner  may  continue  to 
use  it.  Hazard  v.  Caswell,  93  N.  Y.  259  (1883)  ;  Smith  v.  Walker, 
57  Mich.  456  (1885). 

2  It  will  be  protected  from  infringement  by  strangers.  Bell  v. 
Locke,  3  Paige,  75  (1832). 


USUAL  CLAUSES.  521 

continuing,  or  as  ending  at  the  expiration  of  the  seven  Bk.  III. 
years.      It  was  held  that  the  good- will  to  be  valued,  was  ^hap.  9.  Sect. 

the  good-will  of  a  business  ending  with  the  seven  years,  11 

and  that  therefore  the  retiring  partner's  interest  in  it 
was  nominal  merely. 

In  Wade  v.  Jenkins  (x),  partnership  articles  stipu-  Wade  v. 
lated  that  the  good-will  should  be  deemed  to  be  of  the  Jenkins, 
value  of  6000Z.  and  should  belong  to  the  partners  in 
the  proportions  in  which  they  were  entitled  to  the  capi- 
tal, but  that  the  value  of  the  good-will  should  not  be 
taken  into  account  ia  any  of  the  accounts  between  the 
partners.  On  the  death  of  one  of  the  partners  it  was 
held  that  he  was  entitled  to  a  share  of  the  good-will; 
and  that  the  last-mentioned  stipulation  only  applied  to 
the  accounts  taken  during  the  continuance  of  the  part- 
nership. 

In  Turner  v.  Major  (y),  partners  agreed  to  dissolve  Turner  v. 
and  to  have  the  assets  and  good-will  sold  by  two  per-  Major, 
sons  selected  by  them;  an  injunction  was  granted  to 
restrain  one  of  the  partners  from  violating  this  agree- 
ment, by  carrying  on  business  on  his  own  account  be- 
fore the  good-will  of  the  partnership  had  been  dis- 
posed of. 

19.   Getting  in  debts. — When  a  firm  is  dissolved,  it  19.  Getting  in 
is  usual  to  appoint  one  of  the  partners,  or   some   third  debts  on  dis- 
person,  to  collect  and  get  in  the  debts  of  the  firm.  But  solution, 
notwithstanding    any    such    arrangement    and    notice 
thereof,  a  debtor  to  the  firm  will  be  discharged  if  he 
pays  to  any  one  of  the  partners  (z).     Effect,  however, 
will  be  given  by  the  Court  to  an  agreement  of  the  na- 
ture in  question,  by  appointing  a  receiver,  and,  if  neces- 
sary, granting  an  injunction  (a).     If  the  agreement  is 
under  seal  and  is  broken,  an  action  for  damages  may 
be  *  brought  upon  it  (6).     But  it  has  been  held  that  [  *-14:9] 
an  agreement  not  under  seal  entered  into  between  two 
members  of  a  dissolved  partnership,  to  the   effect   that 
one  of  them  shall  get  in  the  debts  of  the  firm,  and  pay 
what  he  shall  receive  in  respect  thereof  to  his  co- part- 
ner, is  not  an  agreement  on  which  the  latter  can  main- 
tain any  action  for  damages   in  case  the  debts  are  got 
in,  and  the  money  received  on  account  of  them  is  not 
paid  over;  for  it  is  said  there  is  no  consideration   for 

(x)  2  Giff.  509.     Compare  Steuart  v.  Gladstone.  10  Ch.  I).  626, 
where  there  was  no  clause  specially  applicable  to  good-will. 
(y)  3  Giff.  442. 
(2)  Ante,  p.  134. 
(a)  Davis  v.  Amer,  3  Drew.  (il. 
(i)  As  in  Belcher  v.  Bikes,  SU.&C,  185. 


522 


PARTNERSHIP  ARTICLES. 


Bk.  III. 
Chap.  9.  Sect. 
3. 


Getting  in 
debts  when 
one  firm 
succeeds 
another. 


20.  Assign- 
ment of 
share,  &c, 
by  retiring 
partner. 


[  *  450] 
Assignment 
of  debts. 


Stamp  on 
assignment 


such  an  agreement  (c).  But  it  seems  to  have  been  ad- 
mitted, in  the  case  in  which  this  was  decided,  that  if 
the  partner  to  whom  the  money  when  received  is  to  be 
paid  agrees  that  he  will  take  no  steps  to  collect  the 
debts  himself,  that  will  be  a  sufficient  consideration  to 
support  the  promise  to  pay. 

When  a  partner  retires,  on  the  terms  that  the  con- 
tinuing partners  are  to  get  in  the  old  debts,  and  that 
such  debts,  when  got  in,  are  to  be  taken  into  account  in 
ascertaining  the  share  of  the  retiring  partner,  the  latter 
will  have  a  right  to  charge  the  continuing  partners  with 
whatever  debts  they  may  choose  to  take  to  themselves 
and  not  get  in.  As  observed  by  Lord  Romilly  :  "If 
continuing  partners  who  are  bound  to  get  in  debts  be- 
longing to  an  old  firm,  think  fit  to  enter  into  a  new 
agreement  with  the  debtors  of  the  old  firm,  by  which 
those  debtors  become  the  debtors  of  the  new  firm,  and 
the  debts  of  the  old  firm  become  merged  in  that  of  the 
new  firm  by  a  security  taken  for  the  aggregate  debt, 
such  contimiing  partners  are  liable  to  the  retiring  part- 
ners for  the  amount  of  the  old  debt  as  one  of  the  assets 
received  by  them"  (d). 

20.  Assignment  of  share,  &c. — When  a  partner  re- 
tires or  dies,  and  he  or  his  executors  are  paid  what  is 
due  in  respect  of  his  share,  it  is  customary  for  him  or 
them  formally  to  assign  and  release  his  interest  in  the 
partnership,  and  for  the  continuing  or  surviving  part- 
ners to  take  upon  themselves  the  payment  of  the  out- 
standing debts  of  the  firm,  and  to  indemnify  their  late 
partner  or  his  estate,  from  all  such  debts. 

*  An  assignment  of  all  the  partnership  stock,  debts, 
sums  'of  money,  and  all  other  the  personal  estate  and 
effects  of  the  assignors  as  partners,  did  not  before  the 
Judicature  acts  give  the  assignees  a  right  to  sue  one  of 
the  assignors  for  a  debt  due  from  him  to  the  partner- 
ship (e).  But  if  one  of  the  assignors  after  the  execu- 
tion of  the  deed  releases  a  debt  which  has  been  as- 
signed, or  negotiates  a  bill  held  by  the  firm,  he  becomes 
liable  to  an  action,  for  he  has  no  right  to  derogate  from 
his  own  grant  (/). 

An  assignment  by  a  partner  of  his  share  and  inter- 
est in  the  firm  to  his  co-partners,  in   consideration    of 


(c)  See  Lewis    v.   Edwards,   7   M.  &  W.    300,  where  such    an 
agreement  was  come  to  between  a  solvent  partner  and  the  as- 
signees of  a  bankrupt  partner. 
•  {d)  Lees  v.  Laforest,  14  Beav.  262. 

(e)  See  Aulton  v.  Atkins,  18  C.  B.  249. 

(f )  Aulton  v.  Atkins,  18  C.  B.  249. 


USUAL  CLAUSES.  523 

the  payment  by  them  of  what  is  due  to  hirn  from   the  Bk.  III. 
firm,  is  regarded  as  a  sale  of  property  within  the  mean-  Chap.  9.  Sect. 

ing  of  the  Stamp  acts  ;  and  consequently  the  deed  of  J . 

assignment  requires  an  ad  valorem  stamp  (g).  But  if  by  outgoing 
the  retiring  partner,  instead  of  assigning  his  interest,  PartQer. 
takes  the  amount  due  to  him  from  the  firm,  gives  a  re- 
ceipt for  the  money,  and  acknowledges  that  he  has  no 
more  claims  on  his  co-partners,  they  will  practically  ob- 
tain all  they  want  ;  but  such  a  transaction,  even  if  car- 
ried out  by  deed,  could  hardly  be  held  to  amount  to  a 
sale  ;  and  no  ad  valorem  stamp  it  is  apprehended 
would  be  payable  (h). 

21.   Indemnity  to    outgoing  partner. — An  indemnity  21.  Usual  in- 
is  ordinarily  given  by  a  bond  or  covenant  entered   into  dernnity. 
by  the  continuing  or  surviving  partners,  in  considera- 
tion of  the  assignment  to  them  of  all  the  share  and  in- 
terest of  the  retiring  or  deceased  partner.     The  bond 
or  covenant  should  be  joint  and  several  {%).     The  ef- 
fect of  such  a  bond  or  covenant  is  to  render  a  retiring 
partner,  as  between  himself   and  his  late   co-partners, 
a  surety  only  for  the  payment  of  the  partnership  debts(fc) ; 
*  and  to  render  him  their  specialty  creditor  if,  notwith-  [  *  451] 
standing  their  indemnity,  he  is  compelled  to  pay  those 
debts  (I).1 

(g)  Christie  v.  Commissioners  of  Inland  Revenue,  L.  R.  2  Ex. 
46  ;  Phillips  v.  Same,  ih.  399  ;  Potter  *.  The  Commissioners  of 
Inland  Revenue.  10  Ex.  147.  These  cases  overrule  Belcher  v. 
Bikes,  6  B.  &  C.  234. 

(h)  In  Steer  v.  Crowley,  14  C.  B.  N.  S.  337,  a  release  by  the 
executors  of  a  deceased  partner  did  not  state  the  consideration, 
and  bore  only  a  common  deed  stamp  ;  and  it  was  held  that  the 
deed  was  a  good  document  of  title,  although  some  penalty 
might  be  payable  by  the  parties  to  it,  or  by  their  solicitors  for 
not  stating  the  consideration. 

(i)  See,  as  to  this,  ante  p.  196. 

(k)  Rodgers  v.  Maw,  4  Dowl.  &  L.  66  ;  Oakley  v.  Pasheller,  4 
Gl.  &Fin.  207,  ante  p.  251. 

(?)  Musson  v.  May,  3  V.  &  B.  194. 

1  A  covenant  to  apply  the  assets  received  to  the  payment  of 
the  firm's  debts  does  not  bind  the  covenantor  to  pay  the  out- 
standing debts  to  any  extent  further  than  the  assets  suffice,  Top- 
liff  v.  Jackson,  12  Gray  565  (1859);  such  a  covenant  makes  the 
continuing  partner  a  trustee.  Marsh  v.  Bennett,  5  McLean  117 
(1850).  A  covenant  to  release  a  retiring  partner  from  all  liabil- 
ities amounts  to  a  covenant  to  pay  the  debts,  Griffith  v.  Buck, 
13  Md.  102  (1858).  The  covenantee  can  bring  his  action  on  a 
covenant  to  pay  the  firm's  debts  immediately  on  non-payment, 
although  he  may  not  have  been  vol  obliged  t<>  pavany  debts  him- 
self,  Ham  v.   Hill,  29    Mo.    275   (1860);  Lathrop  v.  Atw 1,21 

Conn.  117(1851);  Farnsworthv.  Boardman,  131  Mass.  L15(1881). 
If  the  covenant  be  to  indemnify  or  bold  harmless  the  retiring 
partner  against  the  firm's  liabilities,  it  is  necessary  before   he 


524 


PARTNERSHIP  ARTICLES. 


Effect  of 
express  in- 
demnity on 
lien. 

Ke  Lang- 
mead's 
trusts. 


Bk.  III.  It  is  to  be  observed,  that  in  the  absence  of  any  agree- 

Chap.  9.  Sect.  ment  to  ^at  effect,  a  retiring  partner  or  the  executor 

~ of  a  deceased  partner  has  no  right  to   an  indemnity 

Right  to  in-  from  the  other  partners,  except  so  far  as  he  may  be  en- 
deninity.  titled  to  have  the  assets  of  the  firm  applied  in  payment 
of  its  debts,  and  to  enforce  contribution  in  case  he  has 
to  pay  more  than  his  share  of  those  debts.  But  if  all 
the  assets  of  the  firm  are  assigned  to  the  continuing  or 
the  surviving  partners,  it  is  only  fair  that  they  should 
undertake  to  pay  its  debts:  and  if  it  appears  that  it 
was  the  intention  of  all  parties  that  they  should  do  so, 
effect  will  be  given  to  such  intention,  although  the  un- 
dertaking on  their  part  is  not  explicit  in  its  terms  (m). 
When  a  retiring  partner  assigns  his  interest  in  the 
partnership  assets,  and  obtains  from  the  continuing 
partners  a  covenant  of  indemnity,  his  lien  on  the  part- 
nership assets  seems  to  be  at  an  end.  In  Re  Lang- 
mead's  trusts  (n)  the  assignment  was  made  expressly 
subject  to  the  payment  of  the  retiring  partner's  share 
of  the  partnership  debts.  The  continuing  partner  be- 
came bankrupt;  and  the  retiring  partner's  executors 
■were  compelled  to  pay  the  unsatisfied  partnership  debts. 
It  was  nevertheless  held  that  they  had  no  lien  on  the 
specific  assets  of  the  old  firm,  but  were  confined  to  their 
remedy  on  the  covenant  for  indemnity. 

22.  Arbitration  clauses. — With  respect  to  these,  it  is 
to  be  observed: — 

1.  That  an  agreement  to  refer  to  arbitration  is  one 
which  a  court  will  not  decree  to  be  specifically  per- 
formed (o); '  and 

2.  That  it  is  one  which  (independently  of  the  Com- 
mon law  procedure  act  of  1854)  cannot  be  effectually 
set  up  as  a  defence  to  any  action  relative  to  a  matter 

[  *452]        agreed  to  be  *  referred  (p);2  unless,  indeed,  the  refer- 
ence has  been  expressly  made  a  condition  precedent  to 

(m)  See  Saltoun  v.  Honstoun,  1  Bing.  433. 

(n)  7  De  G.  M.  &  G.  333.  See,  too,  Lingen  v.  Simpson,  1  Sim. 
&  Stu.  600.     See,  ante,  pp.  354,  355. 

(o)  Agar  v.  Macklew,  2  Sim.  &Stu.  418;  Street  v.  Rigby,  6  Yes. 
818.  An  action  will  lie  for  not  referring  in  pursuance  of  an 
agreement  so  to  do,  Livingston  v.  Ralli,  5  E.  &  B.  132.  See, 
generally.  Fry,  Spec.  Perf.  eh.  8  (ed.  2). 

{p)  Dawson  v.  Fitzgerald,  1  Ex.  D.  257;  Edwards  r.  Aberay- 
ron,  &c.,  Soc,  1  Q.  B.  D.  5G3;  Cooke  V.  Cooke,  4  Eq.  77;  and  the 
older  cases  referred  to  theie. 

can  bring  his  action  on  the  covenant,  that  he  be  actually  dam- 
aged by  having  to  pay  the  debts,  Gilbert  r.  Wiman,  1  N.  Y. 
550  (1848);  Carter  r.  Adamson,  21  Ark.  287  (1860). 

1  Page  v.  Vankirk,  6  Phila.  264  (1867). 

2  Meaner  v.  Cox,  3?  Ala.  201  (1861). 


22.  Arbitra- 
tion clauses. 


USUAL  CLAUSES.  525 

the  right  to  sue  (q).  At  the  same  time  a  Court  -will  some-  Bk.  III. 
times  decline  to  interfere  between    partners  who  have  Chap.  9.  Sect. 

agreed  that  their  disputes  should  be  referred  to  arbitra- 

tion,  and  who  have  not  attempted  so  to  settle  them  (r). 

By  17  &  18  Vict.  c.  125,  which  contains  several  im-  17  &  is  Vict, 
portant  provisions  respecting   agreements   to  refer  to  c.  125,  §  11. 
arbitration,  it  is  amongst  other  things  (by  §  11)  en- 
acted that, — 

"Whenever  the  parties  to  any  deed  or  instrument  in  writing 
to  be  hereafter  made  or  executed,  or  any  of  them,  shall  agree  (s) 
that  any  then  existing  or  future  differences  between  them  or  any 
of  them  shall  be  referred  to  arbitration,  and  any  one  or  more  of 
the  parties  so  agreeing,  or  any  person  or  persons  claiming  through 
or  under  him  or  them,  shall  nevertheless  commence  any  action 
at  law  or  suit  in  equit}r  against  the  other  party  or  parties,  or  any 
of  them,  or  against  any  person  or  persons  claiming  through  or 
under  him  or  them,  in  respect  of  the  matters  so  agreed  to  be  referred, 
or  any  of  them,  it  shall  be  lawful  for  the  court  in  which  action 
or  suit  is  brought,  or  a  judge  thereof,  on  application  by  the  de- 
fendant or  defendants,  or  any  of  them,  after  appearance,  and  be- 
fore plea  or  answer,  upon  being  satisfied  that  no  sufficient  reason 
exists  why  such  matters  cannot  be  or  ought  not  to  be  referred  to 
arbitration  according  to  such  agreement  as  aforesaid,  and  that 
the  defendant  was  at  the  time  of  the  bringing  of  such  action  or 
suit  and  still  is  ready  and  willing  to  join  and  concur  in  all  acts 
necessary  and  proper  for  causing  such  matters  so  to  be  decided 
by  arbitration,  to  make  a  rule  or  order  staying  all  proceedings 
in  such  action  or  suit,  on  such  terms,  as  to  costs  and  otherwise, 
as  to  such  court  or  judge  may  seem  fit:  Provided  always  that 
any  such  rule  or  order  may  at  any  time  afterwards  be  discharged 
or  varied  as  justice  may  require." 

The  section  does  not  apply  where  a  submission  to  re- 
fer has  been  revoked  before  action  (t). 

(q)  See  Scott  v.  Avery,  5  H.  L.  C.  811;  Halfhide  r.  Fenning.  2 
Bro.  C.  C.  336.  The  last  case  is  generally  regarded  as  overruled, 
but  quaere  whether  it  is  not  capable  of  being  supported  on  the 
principle  recognised  in  Scott  v.  Avery.  See  the  observations  of 
Lord  St.  Leonards  in  Dimsdale  v.  Robertson,  2  Jo.  &  Lat.  91, 
and  of  V.-C.  Wood  in  Cooke  v.  Cooke,  4  Eq.  77. 

(r)  Waters  v.  Tavlor,  15  Ves.  10. 

(»)  In  Blyth  r.  'Lafone,  1  E.  &  E.  4:;.").  it  was  held  that  the 
agreement  to  refer  must  be  contained  in  the  instrument  on  which 
the  dispute  arises.  But  this  has  been  overruled.  See  Randell, 
Saunders,  and  Co.  v.  Thompson,  1  Q.  B.  D.  748,  and  Mason  v. 
Haddan,  6  C.  B.  N.  S.  525. 

(t)  Randell,  Saunders,  and  Co.  v.  Thompson.  1  Q.  B.  D.  748. 
See.  also,  Deutsche  Springstofi  Actien  Gesellschaft  v.  Briscoe,  20 
Q.  B.  D.  177. 


526  PARTNERSHIP  ARTICLES. 

[*453]  *The   Court  will  decide  whether  the  matters  in  dis- 

Bk.  III.  pute  are  or  are  not  within  the  arbitration  clause  (u). 

Chap.  9.  Sect.  gu^  even  jf  they  are,  the  section  is  not  imperative  ;  and 

~ .        the  Court  in  the  exercise  of  its  discretion  has  declined 

to  interfere  where  there  were  several  matters  in  dispute, 
some  only  of  which  were  within  the  agreement  to  re- 
fer (v);  where  one  of  the  parties  had  become  bank- 
rupt (x)  where  there  was  a  bond  fide  suggestion  of 
fraud  (y);  where  there  was  really  no  question  in  dis- 
pute, and  the  defendant's  only  object  was  delay  (z); 
where  the  object  was  to  stop  a  suit,  and  not  really  to 
settle  a  dispute,  which  the  defendant  desired  to  refer 
before  the  suit  was  commenced  (a). 

Where,  however,  there  is  a  bond  fide  dispute  within 
the  meaning  of  an  agreement  to  refer,  and  there  is  no 
satisfactory  reason  why  such  dispute  should  not  be 
settled  by  arbitration,  legal  proceedings  will  be 
stayed  (6);  even  although  the  agreement  to  refer  is 
contained  in  articles  of  partnership  for  a  term  of  years 
which  has  expired  (c). 

In  one  case  the  Court  refused  to  interfere  where  the 
plaintiff  sought  to  have  a  partnership  dissolved,  and  to 
have  a  receiver  appointed,  on  the  ground  of  the  de- 
fendant's misconduct  (d);  but  this  case  has  not  been 
followed  (e);  nor  is  there  any  reason  why  the  Court 
should  not  appoint  a  receiver,  if  necessary,  pending  the 
arbitration  (f).1 
\  *  454]  *  Under    a    general    submission  by  partners  of    all 

Power  of        matters  in  difference  between  them,  an  arbitrator  may 

arbitrator. . 

(u)  See  Piercy  v.  Young,  14  Ch.  D.  200. 

(v)  Wheatley   v.  Westminster.  &c.,  Coal  Co.,  2  Dr.  &  Sm.  347. 
(»)  Pennell  v.  Walker,  18  C.  B.  651. 

(y)  Wallis  v.  Hirsch,  1  C.  B.  N.  S.  316.  Compare  Russell  v. 
Russell,  14  Ch.  D.  471,  where  the  party  complaining  of  fraud 
resisted  arbitration. 

(z)  Lury  ?j.  Pearson,  1  C.  B.  N.  S.  639.  The  true  grounds  of 
this  decision  appear  to  have  been  those  stated  above,  but  the 
report  is  obscure. 

(a)  Corcoran  v.  Witt,  8  Ch.  476  n.,  explained  in  16  Eq.  571. 

(b)  As  in  Russell  v.  Russell,  14  Ch.  D.  471,  where  notice  to  dis- 
solve had  been  given;  Law  v.  Garrett,  8  Ch.  I).  26,  where  th« 
agreement  was  to  refer  to  a  foreign  tribunal  ;  Plews  r.  Baker,  16 
Eq.  564  ;  Willesford  v.  Watson,  8  Ch.  473,  and  14  Eq.  572  ;  Ran- 
degger  v.  Holmes,  L.  R.  1  C.  P.  679  ;  Seligmann  v.  Le  Boutillier, 
ib.  681  ;  Russell  v.  Pellegrini,  6  E.  &  B.  1020:  Hirsch  v.  Im 
Thurn,  4  C.  B.  N.  S.  569. 

(c)  Gillett  v.  Thornton,  19  Eq.  599. 

\d)  Cook  v.  Catchpole,  10  Jur.  N.  S.  1068. 

(e)  Plews  v.  Baker,  16  Eq.  564  ;  Gillett  v.  Thornton,  19  Eq.  599. 

(  f)  See  as  to  this,  infra,  note  (o). 

1  Page  v.  Vankirk,  6  Phila.  264  (1867). 


USUAL  CLAUSES.  527 

dissolve  the  partnership  {g);  and  may  order  one  part-  Bk.  ITT. 
ner  to  pay  or  give  security  for  the  payment  of  a  certain  Chap.  9.  sect. 

sum  to  the  other  (h) ;  and  apportion  the  assets  between  11 

them  (i);1  and  order  conveyances  to  be  made  (k)\  and 
direct  one  partner  to  sue  in  the  name  of  himself  and 
others,  and  give  them  a  bond  of  indemnity  (I):  and 
restrain  one  partner  from  carrying  on  business  within 
certain  limits  (m);  and  direct  mutual  releases  to  be 
executed  (n).  It  seems,  however,  that  the  arbitrator 
cannot  appoint  a  receiver  to  collect  and  get  in  the 
partnership  assets  and  credits  (o);  nor  direct  one  of 
the  partners  to  pay  money  to  him  (the  arbitrator)  in 
order  that  he  may  apply  it  in  payment  of  certain  speci- 
fied debts  (p).  It  has  also  been  held  that  an  arbitrator 
cannot  enter  into  the  question  whether  any  part  of  a 
premium  paid  on  entering  into  the  partnership  shall 
be  refunded,  unless  the  submission  pointedly  raises 
that  question  for  determination  (q). 

23.    Penalties   and    liquidated    damages. — The   last  23.  Penalties, 
clause  in  a  partnerseip  deed  is  often  one  by  which  each  &c> 
partner  binds  himself  to  pay,  either  by  way  of  penalty  or 
by  way  of  liquidated  damages,  a  certain  sum  in  case  of  the 
infringement  by  him  of  any  agreement  contained  in  the 
previous  clauses.    A  stipulation  that  on  the  breach  of  any 
agreement  in  the  articles,  a  sum  *  shall  be  paid  by  way  [  *  455] 
of  penalty  is  of  little  real  use,  and  is  sometimes  worse 
than  useless,  for  the  sum    mentioned  will  not  be  pay- 
able unless  damage  to  its  amount  can  be  proved  (r); 
and  on  the  other  hand  the  penalty  generally  limits  the 

(g)  Green  v.  Waring,  1  W.  Blacks.  475  ;  Hutchinson  v.  Whit, 
field,  Hayes,  Ir.  Ex.  78.  Simmonds  r.  Swayne,  1  Taunt.  549- 
shows  that  a  dissolution  need  not  be  awarded. 

(h)  Simmonds  v.  Swaine,    1  Taunt.  549. 

(i)  Lingood  v.  Eade,  2  Atk.  505  ;  Wood  i  Wilson  2  Cr.  M.  & 
R.  241  ;  Wilkinson  v.  Page,  1  Ha.  276. 

(fc)  Wood  v.  Wilson,  2  Cr.  M.  &  R.  241. 

(I)  Burton  v.  Wigley,  1   Binsj.  N.  C.  665  ;  and  see  Goddard  v. 

Mansfield,  19  L.  J.  Q.  B.  305  f  Philips  v.  Knightley,  2  Str.  903. 

in  \  Morley  v.  Newman,  5  D.  &  R.  317.     In  Burton  v.  Wigley, 

1.  Bing.  N.  C.  665,  the    award   permitted  a  partner  to  carry  on 

business,  although  the  articles  provided  for  his  not  doing  so. 

(n)  Lingood  v.  Eade,  2  Atk.  505,  where  the  arbitrator  directed 
such  releases  to  be  settled  bv  a  Master  in  Chancer, v. 

(o)  Lingood  v.  Eade,  2  Atk.  505  ;  Re  Mackay,  2  A.  &  E.  356. 
But  a  receiver  was  appointed  in  Routh  v.  Peach,  2  Anstr.  519, 
and  3  ib.  637. 

(p)  Be  Mackay,  2  A.  &  E.  356. 

(q)  See  Tattersall  v.  Groote,  2  Bos.  &  P.  131. 

(r)  See  the  note  to  Gainsford  v.  Griffith,  1  Wins.  Saund.  57. 

1  Lamphire  v.  Cowan,  39  Vt.  420  (1867). 


528  PARTNERSHIP  ARTICLES. 

B£"  II1-  <a       compensation  which  can    be  obtained,  even    although 
Chap.  9.  Sect.  darnage   ^0  a    greater    extent  has   been  sustained    (s). 

- Moreover,  if  there  are  several  covenants,  and  if  for  any 

breach,  however  trival,  of  any  of  them  involving  the 
payment  of  a  small  sum  of  money,  it  is  stipulated  that 
a  large  sum  shall  be  paid  byway  of  liquidated  damages, 
the  stipulation  is  always  construed  as  a  stipulation  for 
payment  of  the  larger  sum  by  way  of  penalty  (t ).  An 
agreement  to  pay  a  definite  sum  as  liquidated  damages 
in  certain  specified  events,  e.  g.,  on  carrying  on  business 
within  prescribed  limits,  may  no  doubt  prove  useful  (u) ; 
but  even  in  these  cases  care  must  be  taken  not  to  make 
the  contract  alternative  ;  for  if  it  is  and  the  stipulated 
sum  is  paid,  a  court  will  not  interfere  by  injunction  (x). 
The  mere  existence  of  an  agreement  for  liquidated 
damages  does  not,  however,  necessarily  make  a  con- 
tract alternative,  and  preclude  such  interference  (y). 

(s)  See  Clarke  v.  Ld.  Abingdon,  17  Ves.  106. 

(t)  See  Wallis  v.  Smith,  21  Ch.  D.  243,  where  all  the  older 
cases  are  reviewed.  See,  also,  Elphinstone  v.  Monkland  Iron 
and  Coal  Co.,  11  App.  Ca.  332. 

(m)  Atkyns  v.  Kinnier,  4  Ex.  776  ;  Beynolds  v.  Bridge,  6  E.  & 
B.  528,  may  he  referred  to  as  examples.  See,  too,  The  East  India 
Co.  v.  Blake,  Finch.  117,  where  it  was  held  that  though  a  court 
of  equity  would  relieve  against  a  penalty,  it  would  not  relieve 
against  payment  of  liquated  damages. 

(x)  Sainter  v.  Ferguson,  1  Mac.  &  G.  286  ;  Woodward  r.  Gvles  ; 
2  Vern.  119. 

(y)  French  v.  Macale,  2  Dr.  &  War.  269  ;  Coles  v.  Sims,  5  De 
G.  M.  &  G.  1  ;  and  see  Avery  v.  Langford,  Kav,  663  ;  Clarkson 
v.  Edge,  33  Beav.  227. 


ACTIONS  BETWEEN  PARTNERS.  529 


*  CHAPTER  X.  [*4561 

OF  ACTIONS  BETWEEN  PARTNERS. 

Section  I. — General  Observations. 

1.  Law  before  the  Judicature  acts. 

The  mutual  rights  and  obligations  of  partners  hav-  Bk.  III. 
ing  been  examined,  it  is  proposed  in  the  next  place  to  Chap.  10. 
consider  the  means  by  which  those  rights  and  obliga-  Sect-  1- 
tions  can  be  enforced. 

It  has  been  already  seen  (Bk.  ii.,  c.  3)  that  before  the  Legal  pro- 
Judicature  acts  there  was  no  method  by  which  an  or-  ceedings 
dinary  firm  could  sue  or  be  sued  by  any  of  its  members,  between 
either  at  law  or  in  equity  ;  for  the  firm,  as  distinguish-  par  ners' 
ed  from  the  persons  composing  it,  had  no  judicial  exis- 
tence.    All  proceedings,  therefore,  which  had  for  their 
object  the  enforcement  of  the  mutual  rights  and  obli- 
gations of  partners,  had  to  be  taken  by  some  or  one  of 
the  members  of  a  firm  individually  against  some  others 
or   other    of    them    also    individually.       The     conse- 
quences of  this  rule  were  important,  for  it    followed 
from  it — 

1.  That  no  action  at  law  could  be  brought  by  one 
partner  against  another  for  the  recovery  of  money  or 
property  payable  to  the  firm  as  distinguished  from  the 
partner  suing  ; 

2.  That  no  suit  in  equity  was  maintainable  by  one 
partner  against  another  with  respect  to  a  matter  in- 
which  the  firm  was  interested,  without  bringing  all  the 
members  thereof  before  the  court.  This  rule  was  sub- 
ject to  exceptions,  as  will  be  seen  hereafter  ;  but  it  was 
established  as  a  rule,  and  flowed  from  the  non-recogni- 
tion of  the  firm. 

Moreover,  until  the  law  was  altered  by  31  &  32  Vict, 
c.  116,  no  criminal  prosecution  was  sustainable  by  one 
partner  against  *  another  for  stealing  the  property  of[*457] 

*  11   LAW   OF   PARTNERSHIP. 


530  ACTIONS  BETWEEN  PARTNERS. 


Bk.  III.  the  firm  (a).1     But  this  inconvenience  has  been  remov- 

Chap.  10.        e(j  ^y  ^e  above  mentioned  statute  (b). 

L     The   inability   of  a  firm  to  sue  one  of  its  members, 

and  vice  versa,  arose  from  the  circumstance,  that  in  an 
action  by  a  firm  against  one  of  its  members,  or  vice 
versa,  the  member  in  question  must  be  both  a  plaintiff 
and  a  defendant.  Practically  it  is  often  extremely  incon- 
venient to  have  recourse  to  the  intervention  of  a  trustee, 
and  to  procure  agreements  to  be  made  with  him  so  as 
to  enable  him  to  sue  and  be  sued  thereon.  But,  in- 
convenient as  this  was,  it  was  only  through  the  inter- 
vention of  a  trustee  that  agreements  between  partners 
and  the  firms  to  which  they  belonged,  could  be  so  en- 
tered into  as  to  be  enforceable  by  action  at  law  (c).  An 
agreement  by  each  partner  with  his  co-partners  might 
indeed  be  framed  so(  as  to  enable  one  to  be  sued  by  the 
others,  if  care  was  taken  to  exclude  the  partner  sued 
from  all  share  in  what  was  sought  to  be  recovered  from 
him,  and  to  exclude  the  partner  suing  from  all  obliga- 
tion to  contribute  to  his  own  payment  (d);  but  an 
[  *  458]  agreement  drawn  *  so  as  to  accomplish  both  these  ob- 
jects; was  not  generally  convenient. 

(a)  In  R.  v.  Warburton,  L.  R.  1  Cr.  Ca.  Res.  274,  it  was  held 
that  a  partner  might  be  convicted  of  conspiring  with  others 
to  defraud  his  co- partner  by  falsifying  the  accounts  of  the  tirm, 
and  thereby,  in  effect,  robbing  his  co-partner.  But  in  R.  v. 
Evans,  9  Jur.  N.  S.  184,  a  partner  who  misrepresented  the  part- 
nership accounts,  and  thereby  obtained  more  than  his  share  of 
money,  was  held  not  liable  to  conviction  for  obtaining  money 
Trader  false  pretences  ;  and  in  R.  v.  Loose,  29  L.  J.  M.  C.  132, 
R.  v.  Marsh,  3  Fos.  &  Fin.  523,  R.  v.  Bren,  3N.  R.  176.  members 
of  friendly  societies  indicted  for  stealing  the  monies  of  the  so- 
cieties were  held  not  liable  to  conviction.  However,  in  R.  v. 
McDonald,  7  Jur.  N.  S.  1127,  a  servant  who  was  paid  a  salary 
and  a  percentage  of  profits  was  convicted  of  embezzlement  ;  and 
in  R.  v.  Burgess,  2  N.  R.  85,  and  in  R.  v.  Webster,  7  Jur.  N.  S. 
1208,  a  member  of  a  friendly  society  was  convicted  of  larceny, 
and  in  R.  v.  Proud,  10  W.  R.  62.  of  embezzlement.  In  the  last 
three  cases,  however,  there  were  special  cirsumstances  as  regards 
the  possession  of  the  money  and  the  trust  reposed  in  the  prisoner. 
A  shareholder  in  a  banking  company  governed  by  7  Geo.  4, 
c.  46,  was  convicted  of  embezzling  money  of  the  company  in  R. 
v.  Atkinson,  Car.  &  Marsh.  525. 

(6)  See  on  it,  R.  v.  Smith,  L.  R.  1  Cr.  Ca.  R.  266  ;  R.  v.  Rob- 
son,  16  Q.  B.  D.  137  ;  Roope  v.  D'Avigdor,  10  ib.  412. 

(c)  See  Bedford  v.  Brutton,  1  Bing.  N.  C.  399  ;  as  to  an  action 
by  a  partner  against  the  trustees  of  himself  and  co-partner. 

(d)  Radenhurst  v.  Bates,  3  Bing.  463. 

'See  Napoleon  v.  State,  3  Texas  App.  522  (1878).  In  Jones?-. 
State,  76  Ala.  8  (1884)  one  partnershot  another  while  the  latter 
was  attempting  to  remove  the  firm's  money  from  a  certain  draw- 
er, but  this  circumstance  was  held  not  to  reduce  the  defendant's 
crime  from  murder  to  manslaughter. 


GENERAL  OBSERVATIONS.  531 

It  was  not,  however,  competent  for  partners  to  estab-  Bk.  III. 
lish,   even    as    amongst    themselves,  a  rule  that  some  Chap.  10- 
officer,  e.  g.,  the  treasurer  or  secretary  of  the  firm  for    ' 


the  time  being,  should,  as  it  were,  represent  the  firm  Stipulation 
and  sue  and  be  sued  on  its  behalf  accordingly.     Consis-  tnat 
tently  with  the  established  law,  effect  could  not  be  given  ^c^iorVime 
to  such  a  rule,  and  it  was  simply  nugatory  (e).     The  being  shall 
consequences  of  this  doctrine  when  applied  to  compa-  sue. 
nies  were  extremely  serious. 


2.  Effect  of  Judicature  acts. 

The  general  effect  of  the  Judicature  acts,  so  far  as  Effect  of  the 
they  relate  to  legal  proceedings  by  partnerships,  has  Judicature 
been  already  investigated  (Bk.  ii.,  c.  3);  and  it  was  then  acts' 
seen  that  a  firm  can  now  sue  and  be  sued  in  its  mercan- 
tile name  ;  that  where  parties  are  numerous  and  have  a 
common  interest,  some  of  them  may  sue  and  be  sued 
on  behalf  of  all  in  respect  thereof.  Further,  there  is 
now  the  same  facility  in  arranging  parties  to  actions 
in  all  divisions  of  the  High  Court  as  there  was  formerly 
in  arranging  parties  to  suits  in  equity  ;  and  the  fact 
that  an  account  has  to  be  taken  in  order  to  ascertain 
what  is  due  from  one  party  to  another  is  no  longer  any 
reason  why  an  action  by  one  against  the  other  should 
fail  ;  at  most,  such  a  circumstance  may  render  it  ex- 
pedient to  transfer  the  action  from  one  division  of  the 
High  Court  to  the  other  at  some  stage  of  the  action.  Nor 
is  there  any  danger  now  of  an  action  for  an  account 
being  held  unsustainable  on  the  ground  that  an  action 
for  damages  is  the  proper  remedy  (/). 

With    respect    to  actions    by    the   firm,  it   has  been  Actions  by 
already  *  pointed  out  that  the  name  of  the  tirmisonly  [  *  459] 
a  compendious  expression,  for  denoting  the  individuals  and  against 
composing  the  firm  when  the  name  of  the  firm  is  used.  tne  firm' 
It  has  not  yet  been  decided  whether  an  action  in  the  name 
of  the  firm  can  be  maintained  by  or  against  one  of  its  own 
members  ;  but  the  writer  sees  no  difficulty  in  principle 

(e)  Hybart  v.  Parker,  4  C.  B.  N.  S.  209  ;  Evans  v.  Hooper.  1  Q. 
B.  D.  45;  Gray  v.  Pearson,  L.  R.  5  C.  P.  568.  As  to  Bills  of 
Exchange,  sec  ante,  p.  180,  note  (a). 

(/)  See  that  the  jurisdiction  of  the  Court  of  Chancery  to  en- 
tertain a  suit  for  an  account  where  there  was  no  partnership, 
trust,  or  fraud,  Smith  r.  Leveaux,  2  De  G.  J.  &  Sin.  1  ;  Moxon 
».  Bright,  4  Ch.  292;  Hearings  v.  Pugh,  4  Giff.  456;  Barry  v. 
Stevens,  31  Beav.  258.  Sec,  also,  as  t<>  claims  for  mere  damages, 
Great  "Western  Ins.  Co.  v.  Cunliffe.  !»  Ch.  525;  Duncan  v.  Lunt- 
ley,  2  McC.  &  G.  30  ;  Clifford  v.  Brooke,  13  Ves.  132. 


532  ACTIONS  BETWEEN  PARTNERS. 

Bk.  III.  in  supporting  such  an  action  ;  the  firm  being  regarded 

Chap.  10.        for  tke  purposes  of  the  action  as  one  collective  whole(gr). 
Sect-  2-  This,  however,  is  comparatively   an  unimportant  mat- 

ter ;  for  if  an  action  in  that  form  cannot  be  maintained, 
it  is  plain  that  one  partner  can  sue  an other  whenever 
he  has  legal  or  equitable  rights  to  be  enforced  or  ad- 
justed (h). 
Actions  by  or  With  respect  to  actions  by  or  against  some  partners 
against  some  on  behalf  of  themselves  and  others,  it  must  be  borne 
on  behalf  of  in  m[n({  that  suits  in  this  form  have  long  been  familiar 
in  courts  of  equity,  and  certain  rules  respecting  them 
have  been  settled  which  are  not  interfered  with  by  the 
Judicature  acts.  These  rules  will  be  fully  investigated 
presently. 


others. 


Section  II. — Parties  to  Action  Between  Parties. 
1.   General  rule  as  to  partnership  actions. 

General  rales  In  actions  between  partners  not  involving  any  part- 
as  t<»  actions  nership  account  or  any  interference  with  persons 
between  against  whom  no  relief  is  sought,  the  general  principles 

partners.  applicable  to  actions   generally  must   be   observed  (i). 

But  partnership  disputes  usually  involve  the  taking  of 
some  account  in  which  all  the  partners  are  interested, 
or  the  granting  of  an  injunction  or  the  appointment  of 
a  receiver,  which  materially  affects  them  all.  Hence, 
f  *  4601  ^  na8  long  been  a  rule  in  Chancery  that  where  *  the 
number  of  partners  is  not  great  they  must  all  be  par- 
ties to  a  suit  for  an  account  if  within  the  jurisdiction 
of  the  court  (k),1  and  subject  to  the  question  how  far 
the  firm  can  be  treated  as  representing  them  all,  this 
rule  is  still  in  force. 

Upon  a  similar  principle,  where  a  creditor  of  a  firm 
against  estate  sought  payment  of  his  debt  out  of  the  estate  of  a  de- 

of  deceased 

partner.  {g)  Such  actions  are  common  in  Scotland. 

(h)  There  may,  however,  still  be  difficulties  in  framing  an  ac- 
tion properly  as  in  Robertson  r.  Southgate,  6  Ha.  536.  In  that 
case  there  was  a  partnership  of  three  persons,  A.,  B.  and  C. ;  A. 
retired,  B.  filed  a  bill  against  A.  and  C.  to  set  aside  a  fraudulent 
transaction  in  which  the  two  defendants  had  concurred  ;  then 
A.  and  B.  became  bankrupt  ;  it  was  held  that  the  joint  assignees 
of  A.  and  B.  could  not  proceed  with  the  suit  against  C. 
(i)  Anle,  book  ii.  ch.  3. 
(k)  See  Hills  v.  Nash,  1  Ph.  594. 

1McKaigf.  Hebb,  42  Md.    227   (1874);  Arnold  v.   Arnold,  90 
N.  Y.  580  (1882);  Stevenson  v.  Mathers,  67  111.  123  (1873). 


PARTIES.  533 

ceased  partner,  the  surviving  partners  had  to  be  made  Bk.  III. 

co-defendants  with  the  executors  of  the  deceased   (I).1  Chap.  10. 

Sect    " 
It  follows  from  the  same  principle  that  to  an  action  for 


a  dissolution  and  winding  up  of  an  ordinary  partner-  Actions  for 
ship,  all  the  partners  within  the   jurisdiction   must   be  dissolution. 
parties  (in),2  and  that  the  representatives  of  deceased 
partners  must  be  parties  also  if  they  have  any  interest 
in  the  partnership  accounts  (n).z 

But  although  in  an  action  for  obtaining  payment   of  Action  for 
a  proportion  of  an  unascertained  sum,  all  the   persons  snaie  °f 
interested  in  that  sum  must,  as  a  general  rule,  be  par-  snm 
ties,  yet  where  the  sum  to  be  divided  is  ascertained  and 
the  shares  into  which  it  is  divided  are  also  ascertained, 
an  action  for  the  payment  of  one  of  those  shares  may  be 
maintained  without  making  the   persons   interested   in 
the  other  shares  parties  (o). 

So,  where  the   account   which   is   sought   is   one   in  Sub-partner- 
which  the  partnership  is  not  concerned,  it  is  not  neces-  smP- 
sary  or  proper  to   make   all   the  partners  parties.     If, 
therefore,  a  partner  has  agreed  to  share  his  profits  with 

(I)  Be  Hodgson  31  Ch.  D.  192;  Wilkinson  v.  Henderson.  1  M. 
&  K.  582.     This  subject  will  be  examined  hereafter. 

(in)  Evans  v.  Stokes,  1  Keen.  24;  Richardson  v.  Hastings,  7 
Beav.  301;  Harvey  v.  Bignold,  8  ib.  343;  Deeks  v.  Stanhope.  14 
Sim.  57;  Wheeler  v.  Van  Wart,  9  ib.  193;  Long  v.  Yonge.  2  ib. 
369;  Moflat  v.  Farquharson,  2  Bro.  C.  C.  338;  Ireton  v.  Lewis, 
Finch.  96. 

(ft)  See  Cox  v.  Stephens.  9  Jur.  N.  S.  1144,  and  2  N.  R.  506; 
Baboo  Janokey  Doss  v.  Bindabun  Doss.  3  Moo.  In.  App.  175, 
and  Cawthorn  v.  Chalie,  2  Sim.  &  Stu.  127,  where  it  appears  that 
a  surviving  partner  will,  if  necessary,  be  constituted  the  legal 
personal  representative  of  the  deceased. 

(o)  See  Weymouth  v.  Boyer,  1  Ves.  J.  416;  Smith  v.  Snow.  3 
Madd.  10.     Compare  Hills  V  Nash.  1  Ph.  594. 

1  In  America  the  practice  on  this  point  is  unsettled.  It  has 
been  held  that  since  the  claim  of  a  creditor  against  the  members 
of  a  firm  is  both  joint  and  several,  he  may  proceed  against  the 
estate  of  a  deceased  partner  without  exhausting  his  remedy 
against  the  survivors  of  the  firm.  Blair  v.  Wood,  108  Pa.  St. 
278(1885);  Sampson  v.  Shaw  101  Mass.  145  (1869);  Silverman 
v.  Chase,  90  111.  37  (1878);  Ralston  v.  Moore.  105  Ind.  243  (1885). 
In  other  cases  it  has  been  held  that  the  remedy  against  the  sur- 
viving partners  must  be  exhausted  before  any  proceedings  can 
be  had  against  the  estate  of  a  deceased  partner.  Pope  v.  Cole, 
55  X.  Y.  124  (1873);  Sherman  v.  Kreul.  42  Wis.  33  (1877);  Fil- 
ley.w.  Phelps,  18  Conn.  294  (1847);  Pullen  v.  Whitefield,  55  Ga 
174  (1875). 

-  Arnold  v.  Arnold.  90  X.  Y.  580  (1882);  Fuller  r.  Benjamin, 
2::  Me.  255  (1843  ;  Wickhara  /'.  Davis.  2  1  .Minn.  167(187':  I;  Hank 
v.  Railroad  Co.,  11  Wall.  624  (1870);  McKaig  v.  Eebb,  12  Md. 
227  (18741;  Jenness  r.  Smith.  58  Mich.  280  (1885). 

3  Jenness  r.  Smith.  58  Mich.  280  (1885);  Fuller  v.  Benjamin, 
23  Me.  255  (1843);  Burchard  v.  Boyce,  21  Ga.  6  (1857). 


531 


ACTIONS  BETWEEN  PARTNERS. 


Bk.  III. 
Chap.  10. 
Sect.  2. 

(7*4617 


Action 

against  exe- 
cutors for 
account  of 
profits. 


Effect  of 
praying  in- 
junction. 


a  stranger,  and  the  latter  seeks  an  account  of  those 
profits,  he  should  bring  his  action  against  that  one 
partner  alone,  and  not  make  the  other  parties  (p).1 
*  This  rule,  however,  does  not  apply  to  an  action  for  an 
account  brought  by  an  assignee  of  a  partner's  share  (q):2 
and  where  an  equitable  mortgagee  of  a  share  in  a  mine 
brings  an  action  for  foreclosure,  all  the  partners  ought 
to  be  parties  (r). 

"Whether  in  an  action  against  the  executor  of  a  part- 
ner for  an  account  of  profits  made  by  wrongfully  em- 
ploying the  assets  of  the  deceased  in  the  business  of  a 
firm  of  which  the  executor  is  a  member,  it  is  necessary 
to  make  the  other  members  of  the  firm  parties,  is  not 
always  easy  to  decide.  The  rule  appears  to  be  that  they 
are  necessary  parties  if  the  account  sought  is  an  ac- 
count of  all  the  profits  made  by  the  use  of  the  capital 
of  the  deceased;  but  not  if  the  account  is  confined  to  so 
much  of  those  profits  as  the  executors  have  themselves 
received  (s). 

Although  a  person  may  have  no  interest  in  the  ac- 
count to  be  taken,  and  would  therefore  be  an  improper 
party  to  an  action  confined  to  such  account,  yet,  if  an 
injunction  is  sought  to  be  obtained  against  him  specially, 
he  must  be  made  a  party.  For  this  reason,  the  Bank 
of  England  and  Sheriffs  are  often  made  parties  to  ac- 
tions in  which  they  have  no  real  interest  (t). 


Where  some  partners  may  sue  or  be  sued  on  behalf 
of  themselves  and  others. 


Some  on 
behalf  of 
themselves 
and  others. 


It  has  been  held  in  many  cases,  that  a  bill  praying 
for  a  dissolution  of  a  partnership,  all  the  partners,  how- 
ever numerous,  are  necessary  parties,  and  that  conse- 

(p)  Brown  v.  De  Tastet,  Jac.  284;  Raymond's  case,  cited  by 
Lord  Eldon  in  Ex  parte  Barrow,  2  Rose.  255;  Bray  v.  Fromont,  6 
Madd.  5;  and  see  Killock  v.  Greg,  4  Euss.  285. 

(q)  See  Bergmannn  v.  Macmillan,  17  Ch.  D.  423;  Wethain  v. 
Davey,  30  ib.  574. 

(r)  Eedmayne  v.  Forster.  2  Eq.  467. 

(s)  See  A'yse  v.  Foster,  8  Ch.  309,  andL.  E.  7  H.  L.  318  ;  Simp- 
son v.  Chapman,  4  De  G.  M.  &  G.  154.  Compare  McDonald  v. 
Richardson,  1  Gift'.  81. 

If)  See,  for  example,  Yulliamy  v.  Noble,  3  Mer.  593  ;  Bevah  v. 
Lewis,  1  Sim.  376. 

1  Settembre  v.  Pntman,  30  Cal.  490  (1866V 

2  Wallace's  Appeal,  104  Pa.  St.  559  (1883).  As  to  a  similar 
exception  in  the  case  of  the  mortgagee  ol  the  interest  of  one  of 
partners,  see  Eeceivers  v.  Godwin,  5  N.  J.  Eq.  334  (1846);  Hus- 
ton v.  Neil,  41  Ind.  504  (1873). 


PARTIES.  535 

quently,  a  bill  filed  by  some  on  behalf  of  themselves  and  Bk.  III. 
others,  and  praying  for  a  dissolution,  is  bad  on  demur-  ^ hi*p.  10. 
rur  (u).     This  rule  is  supposed  to  admit  of  no  excep- 


tion, and  it  has,  though  with  expressions  of  *  regret,  [*462] 
been  held  to  apply  to  unincorporated  companies  as  well 
as  to  ordinary  partnerships  (x).  The  reason  given  for 
the  rule  is,  that  the  affairs  of  a  partnership  cannot  be 
finally  wound  up  and  settled  without  deciding  all  ques- 
tions arising  between  all  the  partners,  which  cannot  be 
done  in  the  absence  of  any  one  of  them  (y). 

Even  if  a  partnership  is   empowered  to  sue  and  be  Presence  of 
sued  by  a  public  officer,  his  presence  is  not,  in  an  ac-  public  officer 
tion  for  a  dissolution,  equivalent  to  the  presence  of  all  cjeut 
the  partners  (z). 

But  notwithstanding  these   numerous   authorities,  it  No  instance 
may  be  permitted  to  doubt  whether  it  can  be  considered  °^  decree  for 
as  a  rule  admitting  of  no  exception  whatsoever,  that  to  wnere  ayj  tne 
every  action  for  a  dissolution,  all  the  partners  must  in-  partners  were 
dividually   be    parties.     All   that    can  on  principle  be  not  before 
requisite,   is   that  every  conflicting    interest    shall  be tne  court- 
substantially  represented   by  some  person  before  the 
court.     If,  which  is  possible,  the  interest  of  each  part- 
ner conflicts  with  that  of  all  the  others,  then  all  must 
undoubtedly  be  parties.     But  if  the  partners  are  numer- 
ous, and  it  can  be  shown  that  they   are  divisible  into 
classes,  and  that  all  the  individuals  in  each  class  have  a 
common  interest,   then  although  the  interest  in  each 
class  conflicts  with  that  of  every  other  class,  there  seems 
to  be  no  reason  why,  if  each  class  is  represented  by  one 
or  two  of  the  individuals  composing  it,  a  decree  for  a 
dissolution  should  not  be  made  (a).      There  is  not,  how- 

(m)  Evans  v.  Stokes,  1  Keen.  24  ;  Richardson  v.  Hastings,  7 
Beav.  301;  Harvey  v.  Bignold,  Sib.  343;  Deeks  v.  Stanhope,  14 
Sim.  57;  Wheeler  v.  Van  Wart,  9  Sim.  193;  Long  v.  Yonge,  2  Sim. 
369;  Ireton  v.  Lewis,  Finch.  96;  Moffat  v.  Farquharson,  2  Bro. 
C.  C.  338. 

(x)  See  cases  in  last  note  and  Van  Sandua  v.  Moore,  1  Russ. 
441;  and  Davis  v.  Fisk,  in  Farran  on  Life  Assurances,  and  cited 
by  counsel  in  Younge's  reports,  p.  425. 

(y)  See  Richardson  v.  Hastings,  7  Beav.  307. 

(z)  See  Van  Sandau  v.  Moore,  1  Russ.  441  ;  Davis  r.  Fisk,  cited 
in  You.  425  ;  Abraham  v.  Hannay,  13  Sim.  581  ;  Seddon  v.  Con- 
nell,  10  Sim.  58. 

(a)  See  Richardson  v.  Larpent,  2  Y.  &  C.  C.  C.  514,  and  the  ob- 
servations di' Lord  Cottenham  in  Wallworth  v.  Holt,  I  M.  &  Cr, 
635.  As  to  Cockburn  v.  Thompson,  16  Ves.  321,  see  the  obs.  of 
V.-C.  Shadwell;  2  Sim.  380,  and  observe  that  the  real  object  was 
to  make  the  defendants  account  for  the  money  they  had  received, 
and  that  the  question  as  to  want  of  parties  was  not  raised  with 
reference  to  thai  part  of  the  prayer  of  the  bill  which  sought  a  dis- 
solution.    See    also,  Urd.  xvi.  r.  9,  and  Old.  lv.  it.  3  to  9. 


53o 


ACTIONS  BETWEEN  PARTNERS. 


Bk.  III. 

Chap.  10. 
Sect.  2. 


[  *  463] 
Actions  not 
in  terms 
seeking  a 
dissolution. 


Wallworth  v. 
Holt. 


Actions  not 
seeking 
division  of 
assets. 


[  *  464] 


ever,  so  far  as  the  writer  is  aware,  any  case  in  which  a 
decree  for  a  dissolution  has  actually  been  made  in  the 
absence  of  any  of  the  partners. 

*  In  an  action  not  claiming  a  dissolution,  the  question 
of  parties  turns  entirely  on  the  nature  of  the  right 
sought  to  be  enforced.  If  an  account  is  required,  and 
it  is  one  in  which  the  interest  of  each  partner  is  dis- 
tinct from  and  in  conflict  with  that  of  all  the  others, 
then  all  the  partners,  however  numerous,  must  be  parties, 
and  their  representation  by  others,  or  by  a  public  offi- 
cer or  secretary,  will  not  be  sufficient  (b).  On  the 
other  hand,  if  there  are  no  such  conflicting  interests  as 
above  supposed,  it  will  be  sufficient  if  each  distinct  in- 
terest is  represented  by  a  party  to  the  record  (c). 

It  was  held  in  Wallworth  v.  Holt  (d),  that  where  part- 
ners are  too  numerous  to  be  brought  before  the  Court, 
and  they  are  divisible  into  classes,  and  all  the  individ- 
uals in  one  class  have  a  common  interest,  a  suit  insti- 
tuted by  a  few  individuals  of  that  class  on  behalf  of 
themselves  and  all  the  other  individuals  of  the  same 
class  against  the  other  members  of  the  company,  is  sus- 
tainable. Since  this  decision,  there  have  been  many 
suits  by  some  shareholders  on  behalf  of  themselves  and 
others,  praying  for  very  general  accounts  (but  studi- 
ously avoiding  a  prayer  for  a  dissolution),  and  such 
suits  have  been  successful  whenever  the  interest  of  the 
absent  partners  has  been  the  same  as  that  of  the  plain- 
tiffs on  the  record  (e). 

When  no  dissolution  is  claimed,  and  no  winding  up 
of  the  partnership  is  sought,  an  action  may  be  properly 
instituted  by  some  of  a  number  of  numerous  part- 
ners, on  behalf  of  themselves  and  all  others  whose  in- 
terest is  identical  with  their  own  :  and  this  form  of 
action  is  constantly  adopted  where  numerous  *  part- 
ners seek  to  make  their  managers   account  for  secret 


(b)  See  Van  Sandau  v.  Moore,  1  Russ.  441  ;  Seddon  v.  Con- 
nell,  10  Sirn.  58  ;  Abraham  v.  Hannay,  13  ib.  581 ;  McMahon  v. 
Upton.  2  ib.  473  ;  Sibley  v.  Minton,  27  L.  J.  Ch.  53. 

(c)  Comp.  Harrison  v.  Brown,  5  De  G.  &  Sm.  728. 

(\/)  4  M.  &  Cr.  619.  Cockburn  v.  Thompson,  16  Ves.  321,  is  an 
earlier  decision  on  this  point.  See,  too,  Good  v.  Blewitt,  13  Ves. 
397.  See,  as  to  sura  on  behalf,  &c,  in  cases  of  voluntary  socie- 
ties assuming  to  be  corporations,  Lloyd  v.  Loaring,  6  Ves.  773. 

(e)  See  Apperly  v.  Page,  1  Ph.  779.  See,  for  other  instances, 
Cramer  v.  Bird,  6  Eq.  143;  Wilson  v.  Stanhope.  2  Coll.  629; 
Harvey  r.  Collett,  15  Sim.  332  ;  Cooper  v.  Webb,  ib.  454  ;  Clem- 
ents i\  Bowes.  17  Sim.  167,  and  1  Drew.  684;  Richardson  v. 
Hasting,  7  Beav.  323  ;  Butt  v.  Monteaux,  1  K.  &  J.  98  ;  Shep- 
pard  v.  Oxeuford.  ib.  491  ;  Sibsou  v.  Edgeworth,  2  De  G.  &  S. 
73.     Compare  Williams  v.  Salmond,  2  K.  &  J.  463. 


DISSOLUTION  OF  PARTNERSHIP.  537 

benefits  and  advantages  obtained  by  them  in  breach  of  Bk.  III. 
the  good  faith  owing  to  those  whose  affairs  they  con-  ghatp'.,10" 

duct  (/ ) ;  or  to  rescind  contracts  into  which  the  part- ! ! 

nership  has  been  induced  to  enter  by  false  and  fraudu- 
lent representations  (g).  So  in  the  case  of  mutual  in- 
surance societies  and  friendly  societies  one  member  may 
sue  the  trustees  or  committee  and  one  of  each  class  of 
members  as  representing  all  the  other  members,  where 
the  object  of  the  action  is  to  obtain  payment  of  what 
is  due  to  the  plaintiff  (h). 


Section  III.  —Cases   in  which    Courts    will    not    In- 
terfere Between  Partners. 

There  are   three  general  rules  by  which  courts  of  General 
equity  were  influenced  when    their    interference  was  rules  as  to 
sought  by  one  partner  against  another,  and  to  which  it  ^^^nce 
will  be  convenient  at  once  to  refer  ;  for  the  same  rules  partners. 
are  observed  by  all  divisions  of  the  High  Court  in  all 
actions  which  before  the  Judicature  acts  would   have 
been  suits  in  equity ;  in  other  words,  in  all  actions  for 
specific  performance,  for  an  account,  for  a  receiver,  for 
an  injunction,  and  in  those  actions  for  fraud  in  which 
equitable  relief  as  distinguished  from  the  simple  recov- 
ery of  damages  is  sought.     The  rules  in  question,  how- 
ever, have  no  application  to  cases  in  which  prior  to  the 
Judicature  acts  one  partner  could  have  sued  another  at 
law.     The  rules  alluded  to  are,  1,  not  to  interfere  ex- 
cept with  a  view  to  dissolve  the  partnership  ;  2,  not  to 
interfere  in  matters  of  internal  regulation  ;  3,  not  to 
interfere  at  the  instance  of  persons  who   have    been 
guilty  of  laches. 

1.   Of  the  rule  not  to  interfere  except  with  a  view  to 
a  dissolution. 

Formerly  courts  of  equity  were  adverse  to  interfering  Necessity  of 
at  all  *  between  one  partner  and  another,  unless  it  was  [  *  465  | 
for  the  purpose  of  dissolving  the  partnership  ;  or,  if  it  praying  for  a 
was  dissolved  already,  of  finally  winding  up  its  affairs.  Solution. 
Hence  it  will  be  found  on  reference  to  the  older  re- 

(f)  Chancey  r.  May,  Free,  in  Ch,  59:2  ;  Hicliens  r.  Con^reve,  I 
Buss.  562  ;  Taylor  /•.'  Salmon,  1  M.  &  Cr.  134  ;  Beck  v.  Kantoro- 
wicz,  3  K.  &  J.  237.  0  ,,.      _ 

(n)   Sec  Small  r.  Attwood.  Vuu.  407  ;  and  G  CI.  A:  I'm.  2.5:>. 

(!)  See  Pare  v.  Clegg,  29  Beav.  589;  Bromley  v.  Williams,  32 
ib.  177  ;  Harvey  v.  Beckwith,  2  Hem.  &  M.  429. 


538  ACTIONS  BETWEEN  PARTNERS. 

Bk.  III.  ported  decisions,  that  if  a  dissolution  was  not  sought, 

Chap.  10.        the  court  would  not  decree  a  partnership  account,  nor 
Sect"  3> restrain  a  partner  from  infringing  the  partnership  arti- 
cles, nor  protect  the  partnership  assets   from  destruc- 
tion or  waste.     This  rule,  at  no  time  perhaps  very  in- 
flexible, has  gradually  been  relaxed  ;    it  having  been 
discovered  to  be  more  conducive  to  justice  to  interfere 
to  prevent  some  definite  wrong,  or  to  redress  some  par- 
ticular grievance,  than  to  decline  to  interfere  at  all  un- 
less complete  justice  can  be  done  by  winding  up  the 
partnership,  and  in  that  manner  settling  all   disputes. 
At  the  same  time  so  difficult  is  it  to  shake  off  old  asso- 
ciations, and  to  run  counter   to  established  rules,  that 
traces  of  the  aversion  alluded  to  may  yet  be  found   in 
the  decisions   of  the  courts,  and  especially  in    those 
which  relate  to  the  specific  performance  of  agreements 
to  form  partnerships,  and  in  those  which  relate  to  the 
appointment  of  receivers  and  managers.     Indeed,  not- 
withstanding the  extent  to  which  the  rule  has  been  re- 
laxed in  actions  for  an   account,  or  for  an    injunction, 
one  of   the  first  points  for  consideration,  even  now, 
when  one  partner  sues  another  for  equitable  relief,  is, 
can  relief  be  had  without  dissolving  the  partnership  ? 
Undoubtedly  it  may,  much  more  certainly  than  former- 
Modern  rule,  ly,  but  not  always  when  perhaps  it  ought  (i).      With- 
out stopping  to  inquire  how  the  question   is  to  be  an- 
swered in  any  particular  case  (for  that  will  be  discussed 
hereafter),  it  may  be  stated  as  a  general  proposition, 
that  courts  will  not,  if  they  can  avoid   it,  allow  a  part- 
ner to  derive  advantage  from  his  own  misconduct  by 
compelling  his   co-partner  to   submit  either    to    con- 
tinued wrong,  or  to  a  dissolution  (j);  and  that  rather 
than  permit  an  improper  advantage  to  be  taken  of  a 
rule  designed  to  operate  for  the  benefit  of    all  parties, 
courts  will  interfere  in  modern  times   where  formerly 
they  would  have  declined  to  do  so.     At  the  same  time 
courts  will  not  take  the  management  of  a   going  con- 
cern into  their  own  hands,  and,  if  they  cannot  usefully 
[  *  466]        interfere  in  any  other  manner,  they  will  *  not  interfere 
at  all  unless  for  the  purpose  of  winding  up   the  part- 
nership. 

2.   Of  the  rule  not  to  interfere  in  matters  of  internal 
regulation. 

A  court  of  justice   will   not  interfere  between  part- 


(?')  See  infra,  \  6. 

( j )  See  Fairthorne  v.  Weston,  3  Ha.  392. 


EFFECT  OF  LACHES.  539 

ners  merely  because  they  do  not  agree.     It  is  no  part  Bk.  III. 
of  the  duty  of  the  Court  to  settle  all  partnership  squab-  thap.  10. 
bles:  it  expects  from  every  partner  a  certain  amount  of 


forbearance  and  good  feeling  towards  his  co-partner;  Disinclina- 
and   it  does  not   regard  mere   passing    improprieties,  *lon  to  mter_ 
arising  from  infirmities  of  temper,  as  sufficient  to  war-  ma\tersot 
rant  a  decree  for  dissolution,1  or  an  order  for  an  in-  internal 
junction,  or  a  receiver  (A;).     And  when  partners  have  regulation, 
themselves  agreed  that  the  management  of  their  affairs 
shall  be  entrusted  to  one  or  more  of  them  exclusively, 
the  Court  will   not  remove  the  managers,  or   interfere 
with  them,  unless  they  are  clearly  acting  illegally  or  in 
breach  of  the  trust  reposed  in  them  (Z). 

The  rule  not  to  interfere  in  matters  of  merely  inter-  Clubs, 
nal  regulation  or  discipline  is  strongly  exemplified  in 
cases  of  clubs  (m). 

It  is,  however,  in  dealing  with  disputes  between  the 
members  of  companies  that  the  rule  in  question  is 
practically  of  greatest  importance.  The  application  of 
it  to  them  is,  however,  beyond  the  scope  of  the  present 
volume  (n). 

3.    Of  the  rule  not  to  interfere  at  the  instance  of  per- 
sons ivho  have  been  guilty  of  laches. 

Independently  of  the  Statutes  of  Limitation,  a  plain-  Laches  a  bar 
tiff  may  be  precluded  by  his  own  laches  from  obtain- to  relief  in 
ing  equitable    relief.      Laches   presupposes    not    only  equity  ; 
lapse  of  time,  but  also  *  the  existence  of  circumstances  [  *  467] 
which  render  negligence  imputable;    and  unless  rea- 
sonable vigilance  is  shown  in  the  prosecution  of  a  claim 
to  equitable   relief,  the  Court,   acting  on  the  maxim, 
vigilantibus    non    dormientibus    subveniunt  leges,  will 
decline  to  interfere  (o).2 

(k)  See  Marshall  v.  Colman,  2  J.  &  W.  266;  Smith  v.  Jeyes,  4 
Beav.  503;  Lawson  v.  Morgan,  1  Price,  303;  Cofton  v.  Horner,  5 
Price,  537;  Warder  v.  Stilwell,  3  Jur.  N.  S.  9;  Anderson  v.  An- 
derson, 25  Beav.  190. 

(?)  See  Lawson  v.  Morgan,  1  Price,  307;  "Waters  v.  Taylor.  15 
Ves.  10. 

(m)  See  Fisher  v.  Keane,  11  Ch.  D.  353;  Labouchere  v.  Wharn- 
cliffe,  13  ib.  346;   Dawkins  v.  Antrohus,  17  ib.  615. 

(n)  See  Foss  v.  Harbottle,  2  Ha,  461,  and  other  cases  of  that 
class,  in  the  vol.  on  Companies. 

(o)  Laches  may  preclude  relief,  although  actual  assent  or  in- 
telligent acquiescence  on  the  part  of  the  plaintiff  may  not  be 
proved,  see  Evans  v.  Smallcombe,  L.  R.  3  II.  L.  256.  See,  as  t<> 
acquiescence,  De  Bussche  '■.  Alt,  8  Ch.  D.  314. 

1  Sloan  v.  Moore,  37  Pa.  St.  217  (1860);  Lafond  v.  Deems,  81 
N.  Y.  507  (1880). 

2  It  is  said  that  laches  which  will  bar  equitable  relict'  will  be 


540 


ACTIONS  BETWEEN  PARTNERS. 


Bk.  III. 
Chap.  10. 
Sect.  3. 

to  a  suit  for 
an  account. 
Sherman  v. 
Sherman. 

Acquiescence 
in  account. 


Caches  in  en- 
forcing agree- 
ments for 
partnership. 


[*468] 

Cowell  v. 
Watts. 


In  the  early  case  of  Sherman  v.  Sherman  (p),  two 
persons  had  dealings  as  merchants;  one  of  them  died; 
his  widow  filed  a  bill  for  an  account,  but,  although  the 
Statute  of  Limitations  did  not  apply,  the  bill  was  dis- 
missed, on  the  ground  that  many  years  had  elapsed 
since  the  dealings  in  question  had  taken  place,  and  the 
deceased  had  allowed  any  claims  he  might  have  had  to 
slumber  (q).  Again,  where  an  account  has  been  ren- 
dered, and  has  been  long  acquiesced  in,  unless  fraud 
be  proved,  a  court  will  not  re-open  it,  although  the  ac- 
count may  be  shown  to  be  erroneous,  and  although  no 
final  settlement  was  ever  come  to  (V).  The  same  prin- 
ciple is  acted  on  in  taking  accounts;  for  charges  long 
improperly  made  and  acquiesced  in,  or  long  omitted  to. 
be  made,  and  known  so  to  be,  are  regarded,  in  the  ab- 
sence of  fraud,  as  having  been  made  or  omitted  by 
agreement,  and  the  question  of  mistake  will  not  be 
gone  into  (s). 

The  doctrine  of  laches  is  of  great  importance  where 
persons  have  agreed  to  become  partners,  and  one  of 
them  has  unfairly  left  the  other  to  do  all  the  work,  and 
then,  there  being  a  profit,  comes  forward  and  claims  a 
share  of  it.  In  such  cases  as  these,  the  plaintiff's  con- 
duct lays  him  open  to  the  remark  that  nothing  would 
have  been  heard  of  him  had  the  joint  adventure  ended 
in  loss  instead  of  gain;  and  a  court  will  not  aid  those 
who  can  be  shown  to  have  remained  quiet  in  the  hope 
of  being  able  to  evade  responsibility  in  case  of  loss, 
but  of  being  able  to  claim  a  share  of  gain  in  case  of 
ultimate  success. 

*  Thus,  in  Coivell  v.  Watts  (t)  the  plaintiff  and  the 
defendant  had  agreed  to  take  land  for  the  purpose  of 
improving  it,  and  letting  it  upon  building  leases.  A 
long  lease  was  accordingly  obtained,  and  was  taken  in 
the  name  of  the  defendant.     The  plaintiff  then  applied 


(p)  2  Vera.  276. 

(q)  See,  too,  Stnrt  v.  Hellish.  2  Atk.  610. 

(/•)  Scott  v.  Milne,  5  Beav.  215,  and  on  appeal.  7  Jur.  709. 
See,  too.  Williams  v.  Page,  24  Beav.  654;  Stupart  /'.  Arrowsmith. 
3  Sm.  &  G.  176. 

(s)  Thornton  v.  Procter,  1  Anst.  94,  and  see  ante,  p.  383. 

(t)  2  H.  &  Tw.  224. 

measured  by  the  time  prescribed  by  the  Statute  of  Limitations 
in  analogous  cases  at  law.  McKelvj's  Appeal,  72  Pa.  St.  4.59 
(1872);  Arnettw.  Finney,  41  N.  J.  Eq.  147  (1886);  Blackwell  v. 
Claywell,  75  N.  Ca.  213  (1876).  Time  begins  to  run  from  the 
date  of  the  dissolution  and  not  before  against  the  equitable  right 
of  a  partner  to  an  account.  Askew  v.  Springer,  111  111.  662 
(1885);  Chandler  v.  Chandler,  4  Pick.  78  (1826). 


EFFECT  OF  LACHES.  541 

to  the  defendant  to  enter  into  a  written  agreement  upon  Bk.  III. 
the  subject  of  their  joint  adventure,  but  this  the  de-  Chap.  10- 
fendant  declined.  The  defendant  also  assumed  to  act kject  3" 
as  sole  owner  of  the  land  obtained;  he  removed  the 
plaintiff's  cattle  from  it,  and  borrowed  money  on  a 
mortgage  of  the  land,  and  expended  such  money  in 
building  upon  it.  The  plaintiff  all  this  time  did  noth- 
ing, although  he  was  aware  of  what  was  going  on. 
After  a  lapse  of  eighteen  months  the  plaintiff,  by  his 
solicitor,  called  upon  the  defendant  to  perform  the  or- 
iginal agreement;  and  the  defendant  declining,  a  suit 
for  specific  performance  was  instituted.  The  bill  how- 
ever, was  dismissed  with  costs,  on  the  ground  that  the 
plaintiff  had  by  his  conduct  induced  the  defendant  to 
suppose  that  the  plaintiff  had  abandoned  the  specula- 
tion, and  that  the  defendant  had  the  sole  right  to  the 
land. 

The  doctrine  now  under  discussion  is  especially   ap-  Laches  where 
plicable  to  mining  and  other  partnerships  of  a  highly  partnership 
speculative  character.     Mining   operations   are  so  ex-  is  a  mining 
tremely  doubtful  as  to  their  ultimate  success,  that  it  is  PartnersuiP- 
of  the  highest  importance  that  those  engaged  in  them 
should  know  on   whom   they   can   confidently  rely   for 
aid;  if,  therefore,  a  person  engages  in  a  mining  adven- 
ture in  partnership  with  others,  and  disputes  arise  be- 
tween them,  and  he   is  denied  a  partner's  rights,  he 
should  be  careful  to  assert  his  claims  whilst   the  dis- 
pute is  fresh;   for  if  he  lies  by  until  the  mine  has  been 
rendered  prosperous  by  his  co- partners,  and   he   then 
comes  forward  insisting  on  his  rights  as  a  partner,  and 
seeks  equitable  as   distinguished   from  legal  relief,  he 
will  be  refused  it;  on  the  ground  that  he  has  applied 
for  it  too  late  (u).      On  this   principle,  in   Senhouse  v.  Sen  house  v. 
Christian  (x),  where  several  persons  were  lessees  of  a  Christian, 
colliery,  and  the  lease  being  about  to  expire,  one  *of  [  *  469] 
them  obtained  a  renewal  of  it  in  his  own  name,  Lord 
Ko3slyn  dismissed  with  costs  a  bill  filed  by  the  others 
claiming  the  benefit  of  the  renewed  lease.     The  plain- 
tiffs had  allowed  the  defendant  to  work  the  colliery 
single-handed  at  a  great  expense;    and  although    they 
were  aware  of  all  the  facts  when  the  original   lease  ex- 
pired, they  did  not  take   any   proceedings   to   enforce 
their  rights  until  four  years  afterwards.      This  case  was 
referred  to  with  approbation  by  Lord  Eldon,  in  the  case 

(m)  See,   in  addition  to  the  cases    cited    below,     AJIoway   v. 
Braine,  26  Beav.  575,  and  Walker  v.  Jeffreys,  1  Ha.  341. 

(x)  Cited  1*J  Ves.  157,  and  reported  in  a  note  to  ID  Beav.  356. 


i42 


ACTIONS  BETWEEN  PARTNERS. 


Bk.  III. 
Chap.  10. 
Sect.  3. 


Norway  v. 
Eowe. 

Prendergast 
v.  Turton. 


Clegg  v. 
Edmonson. 


[*470] 
Rule  v. 
Jewell. 


of  Norway  v.  Roive  (y),  in  which  he  refused  a  motion 
for  a  receiver  made  on  behalf  of  a  person  claiming  to 
be  a  partner,  but  whose  rights  had   been  long  denied. 

Again,  in  Prendergast  v.  Turton  (z),  where  the  capi- 
tal subscribed  for  working  a  mine  was  spent,  and  the 
plaintiffs  refused  to  contribute  more,  but  the  other 
partners  did  contribute  more,  and  ultimately,  after  a 
lapse  of  some  years,  succeeded  in  making  the  mine 
profitable,  and  then  the  plaintiffs  came  forward  claim- 
ing their  shares  in  the  concern,  their  bill  was  dismissed 
by  the  Vice-Chancellor  Knight  Bruce,  and  his  decision 
was  affirmed  on  appeal.  The  same  doctrine  was  ap- 
plied in  Clegg  v.  Edmonson  (a),  the  facts  of  which 
were  similar  to  those  of  Senhouse  v.  Christian,  already 
referred  to.  In  two  respects  Clegg  v.  Edmonson  goes 
further  than  the  other  cases  ;  for  first,  the  defendants 
had  brought  in  no  fresh  capital,  the  mine  having  paid 
its  own  expenses;  and  secondly,  although  the  plaintiffs 
had  not  asserted  their  claims  by  legal  proceedings,  they 
had  constantly  insisted  on  their  right  to  participate  in 
the  profits  obtained  by  the  defendants  under  the  re- 
newed lease.  Upon  this  point,  however,  it  was  ob- 
served by  the  Lord  Justice  Turner,  that  he  could  not 
agree  to  a  doctrine  so  dangerous  as  that  a  mere  asser- 
tion of  a  claim,  unaccompanied  by  any  act  to  give  ef- 
fect to  it,  can  avail  to  keep  alive  a  right  which  would 
otherwise  be  precluded  (b). 

*  In  Rule  v.  Jewell  (c)  a  member  of  a  cost  book  min- 
ing company,  which  was  seriously  in  debt,  had  his  shares 
forfeited  for  non-payment  of  calls.  After  five  years  he 
disputed  the  validity  of  the  forfeiture  and  claimed  to 
be  reinstated  as  a  partner.  But  it  was  held  that  he 
was  precluded  by  his  own  laches  from  obtaining  relief. 

(y)  19  Ves.  144.  There  were  more  grounds  than  one  for  this 
decision,  but  the  case  is  always  regarded  as  an  authority  in  sup- 
port of  the  doctrine  acted  on  by  Lord  Rosslyn  in  Senhouse  v. 
Christian. 

(z)  1  Y.  &  C.  C.  C.  98,  and  on  appeal,  13  L.  J.  Ch.  238. 

(a)  8  De  G.  M.  &  G.  787.  The  suit  in  so  far  as  it  sought  for 
an  account  up  to  the  time  of  dissolution  was  sustained. 

(b)  This  general  proposition  must  of  course  be  taken  with 
reference  to  the  case  before  the  Court.  It  cannot  be  laid  down 
as  universally  true  that  protests  are  useless.  They  exclude  in- 
ferences which,  in  their  absence,  might  fairly  be  drawn  from  the 
conduct  of  the  party  protesting,  and  are  conclusive  to  show  that 
no  abandonment  of  right  was  intended.  See  in  Hart  v.  Clarke, 
infra,  p.  472. 

(c)  18  Ch.  D.  660.  The  Statute  of  Limitations  was  pleaded, 
but  was  held  not  to  be  a  defence,  though  the  action  was  not 
commenced  until  after  six  years  from  the  alleged  forfeiture. 
Sed  qu. 


EFFECT  OF  LACHES.  543 

In  the  eases  already  referred  to  it  will   be  observed  Bk.  III. 
that  there  was  no  positive  evidence  that  the   plaintiff  t'hap.^lo. 
had  ever  abandoned  his  rights  (d):  and  in  Clegg  v.  Ed- 


monson  there  was  evidence  to  show  that  no  abandon-  Effect  of  evi- 
ment  had  ever  been  contemplated.     It  need,  however,  dence  ot* 
scarcely  be  observed  that  positive  evidence  of   aban-  ^?t  on~ 
donment,  in  addition  to  the  negative  evidence  derived 
from  mere  lapse   of  time,  during   which   nothing   has 
been  done  by  the  plaintiff,  greatly  improves  the  posi- 
tion of  his  opponent. 

There  are  several  cases  illustrating  this.  In  Jekyl  Jekyl  ». 
v.  Gilbert  (e),  two  artificers  agreed  to  do  work  for  their  Gilbert, 
joint  benefit;  after  the  work  was  done,  the  person  for 
whom  it  was  done  refused  to  pay;  the  defendant  re- 
quested the  plaintiff  to  join  in  legal  proceedings  to 
compel  payment,  but  the  plaintiff  declined.  Thereupon 
the  defendant  brought  an  action  for  payment  of  the 
work  done  by  him,  and  obtained  a  verdict.  The  plain- 
tiff then  claimed  half  the  amount  recovered,  but  the 
Court  held  that  he  was  not  entitled  to  any  share  of  it. 

So  if  a  part-owner  of   a  ship   disapproves  of   a  pro-  DrmS  v. 
posed  voyage,  and  arrests  the  ship  until  the  other  part-  Johnston. 
owners  give  him  security  for  his  share,  he  is  not  enti- 
tled  to  any  portion  of   the   profits   arising   from  such 
voyage  (/). 

*  Again,  where  two  persons  agreed  to  take  land  on  [  *471] 
lease  for  a  building  speculation,  and  one  of  them  after-  Keilly  v. 
wards  opposed  the  prosecution  of  the  speculation  and 
died  without  ever  having  done  anything  to  further  it, 
it  was  held  that  the  equitable  estate  and  the  legal  estate 
were  in  the  same  person,  viz.,  the  survivor,  and  that  he 
was  not  a  trustee  as  to  any  portion  of  the  land  for  the 
executors  of  the  deceased  (g). 

A  fortiori,  if  a  partner  formally  withdraws  from  an 
adventure  when  its  prospects  are  bad  will  he  be  unable 
to  claim  a  share  of  the  profits  resulting  from  it-  if  it  ul-  • 
timately  proves  to  be  profitable  (h);  such  cases,  how- 
ever, are  not  so  much  cases  of  laches  as  of  estoppel  or 
agreements  to  release. 

It  is  now  necessary  to  advert  to  one  or  two  cases  ap-  Cases  in 

(d)  In  Prendergast  v.  Turton  perhaps  there  was,  and  it  is  on 
the  ground  that  'there,  was,  that  Lord  Chelmsford  distinguished 
that  case  from  Hart  r.  Clarke,  which  will  be  noticed  hereafter. 
See  6  H.  L.  C.  657-9.  See,  also,  Garden  Gully,  &c,  Co.  v.  Mc- 
Lister,  1  A  pp.  Ca.  p.   57. 

(e)  McNaghten's  Select  Cases  in  Chancery,  29. 
(/)  Davis  v.  Johnston,   1  Sim.  539. 

(g)  Reilly  v.  Walsh,  11  Ir.  Eq.  22. 

(A)  Maclure  v.  Ripley,  2  Mac.  ct  G.  275. 


544 


ACTIONS  BETWEEN  PARTNERS. 


Bk.  III. 

Chap.  10. 
Sect.  3. 

which  laches 
has  not  been 
a  bar  to 
relief. 
Lake  v. 
Craddock. 


[*472] 

Hart  v. 
Clarke. 


parently  at  variance  with  the  foregoing,  and  in  which 
persons  claiming  the  rights  of  partners  have  succeeded 
in  obtaining  the  assistance  of  a  court  of  equity,  although 
their  demands  have  been  stale,  and  although  the  suc- 
cess of  the  joint  adventure  has  been  due  to  the  exertions 
of  those  against  whom  those  demands  were  made. 

The  case  of  Lake  v.  Craddock  (i)  is  sometimes  re- 
ferred to  as  one  of  the  class  now  in  question.  But  this 
case,  in  truth,  only  decided  that  if  one  of  several  part- 
ners chooses  to  claim  the  benefit  of  partnership  deal- 
ings, after  having  for  some  time  ceased  to  take  any  part 
in  the  affairs  of  the  partnership,  he  must  contribute  his 
share  of  the  outlays  made  by  the  other  partners,  with 
interest.  It  was  not  decided  in  Lake  v.  Craddock  that 
a  partner  could,  on  the  above  terms,  claim  the  benefit 
of  what  had  been  done  by  the  others;  and  although  the 
decree  gave  a  partner  who  had  long  abandoned  the  con- 
cern the  option  of  either  claiming  a  share  on  proper 
terms,  or  of  being  excluded  altogether,  the  other  part- 
ners do  not  appear  to  have  raised  any  objection  to  this 
option  being  given. 

The  cases  which  are  most  at  variance  with  those  re- 
ferred to  *  in  the  preceding  pages,  are  the  recent  cases 
of  Hart  v.  Clarke  and  Clements  v.  Hall. 

In  Hart  v.  Clarke  (k)  the  facts  were  shortly  as  fol- 
lows:— a  mining  company  was  formed  on  the  cost-book 
principle,  and  there  was  no  express  agreement  author- 
ising the  forfeiture  of  shares  on  the  non-payment  of 
calls.  The  plaintiff  and  the  defendants  were  lessees  of  the 
mine,  and  the  only  shareholders  therein.  Money  being 
required  for  carrying  on  the  mine,  and  the  plaintiff  not 
furnishing  his  proportion  of  the  sum  required,  was,  on 
more  than  one  occasion,  informed  that  on  continued 
non-payment  his  shares  would  be  forfeited,  and  ulti- 
mately they  were  declared  forfeited.  The  plaintiff,  who 
had  all  along  denied  the  power  of  his  co- adventurers  to 
forfeit  his  shares,  and  had  suggested  modes  of  obtain- 
ing money  which  they  had  not  approved,  gave  them  no- 

(?')  3  P.  W.  158.  The  bill  in  effect  was  filed  by  the  plaintiff 
against  four  persons,  his  co-partners  for  an  account.  One  of  the 
defendants  had  long  ceased  to  take  any  part  in  the  partnership 
affairs.  An  account  was  decreed,  and  liberty  was  given  to  this 
defendant  to  come  in  on  terms,  or  to  be  excluded.  He  appealed, 
beinsi  discontented  with  the  terms  imposed. 

/.  Clarke  v.  Hart,  6  H.  L.  C.  633,  affirming  Hart  v.  Clarke,  6 
De  G.  M.  and  G.  232,  and  reversing  S.  C.  19  Beav.  349.  See,  also, 
Garden  Gully,  &c,  Co.  v.  McLister,  1  App.  Ca.  39.  also  a  case  of 
forfeiture.  Compare  Rule  v.  Jewell,  18  Ch.  D.  660.  Shares  in 
cost-book  companies  may  now  be  forfeited,  see  32  &  33  Vict.  c. 
19,  I  16,  &c. 


EFFECT  OF  LACHES.  545 

tice  that,  in  the  event  of  the  mine  proving  successful,  Bk.  III. 
he  should  expect  his  share  of  the  profits,  and  should,  if  ^h^p-010- 

necessary,  take  legal  proceedings  to  enforce  his   claim.  : ! L_ 

A  year  and  a  half  then  elapsed,  and  at  the  end  of  that 
time  he  asserted  his  claim;  and  the  defendants  refusing 
to  recognize  it,  a  bill  was  filed  for  an  account.  The 
Master  of  the  Kolls  held  it  to  be  clear  that  no  number 
of  partners  could  exclude  another  partner  and  forfeit 
his  share,  but  that  the  plaintiff  was  not  entitled  to  be 
considered  as  still  a  partner;  (1),  because  the  notice  to 
forfeit  his  share  might  be  regarded  as  a  notice  to  dis- 
solve the  partnership;  and  (2),  because  for  nearly  two 
years  he  bad  taken  no  step  whatever  to  assert  his  rights, 
but  had  allowed  other  people  to  work  the  mine,  and  had 
only  come  forward  when  he  found  it  had  proved  a  pro- 
fitable speculation.  On  appeal  it  was  also  held,  that 
the  supposed  right  to  forfeit  had  no  existence:  but  it 
was  further  held,  (1),  that  the  notice  of  forfeiture  could 
not  operate  as  a  dissolution,  inasmuch  as  that  was  not 
the  object  with  which  the  notice  had  been  given;  and, 
(2),  that,  under  the  peculiar  circumstances  *  of  the  case,  [*473] 
the  plaintiff  could  not  be  held  to  have  shown  any  inten- 
tion to  abandon  the  undertaking,  and  that  the  nature 
of  mining  speculations  was  such  as  to  render  it  inequit- 
able to  lay  down  as  a  general  rule  that  no  adventurer 
should  be  entitled  to  relief  in  equity  when  the  adven- 
ture becomes  productive,  unless  he  had  paid  up  his  calls 
whilst  it  remained  unproductive. 

The  ground  of  the  decision  in  the  above  case,  and  Ground  of 
that  which  distinguishes  it  from  Senhouse  v.  Christian  pe  decision 
and  other  cases  alluded  to  above,  is  this,  viz.,  that  the  case 
plaintiff  in  Hart  v.  Clarke  had,  as  one  of  the  lessees  of 
the  mine,  a  legal  interest  therein,  which  nothing  had 
displaced.  The  Court,  therefore,  was  in  this  position  : 
it  was  compelled  either  to  make  a  decree  in  favour  of 
the  plaintiff,  or  to  declare  him  a  trustee  of  his  share  in 
the  mine  for  the  defendants  ;  and  there  not  being  suf- 
ficient grounds  for  justifying  the  latter  alternative,  the 
former  was  necessarily  adopted  (I).  Upon  no  other 
ground  can  the  case,  it  is  submitted,  be  distinguished 
from  Clegg  v.  Edmonson  and  the  other  cases  alluded  to 
above  ;  for  although  reliance  was  placed,  in  the  judg- 
ment in  Hart  v.  Clarke,  on  the  distinct  notice  given  by 
the  plaintiff  that  he  did  not  acquiesce  in  the  defend- 
ant's conduct,  and  should  insist  on  his  rights,  it  was  de- 
cided in  Clegg   v.  Edmondson   that  a  protest  did  not 

(?)  See  ace.  Rule  v.  Jewell,  18  Ch.  D.  660. 
*  12   LAW   OF   PARTNERSHIP. 


546  ACTIONS  BETWEEN  PARTNERS. 


Ek.  III.  enlarge  the  the  time  within  which  redress   must   be 

Chap.  10.         sought  in  a  court  of  equity  (m). 

J Clements  v.   Hall  (n)  is  another  case  in  which,  not- 

Clements  v.     withstanding  the  lapse  of  a  considerable  time,  it  was 

Hall.  held  that  relief  ought  to  be  given  to  a  person  claiming 

an  interest  in  a  mine  ;  but  the  facts  in  that  case  were 
very  peculiar,  and  four  judges  were  equally  divided, 
Lord  Cranworth  and  Lord  Justice  Turner  holding  that 
the  plaintiff  was  entitled  to  relief,  whilst  Lord  Justice 
Knight  Bruce  and  Lord  Romilly  were  of  a  contrary 
opinion.  The  facts  were  in  substance  as  follows.  A. 
and  B.  were  lessees  of  a  mine  which  they  worked  as 
partners.      The  lease  expired,  but  the  lessees  continued 

[  *  474]  in  *  possession  as  tenants  from  year  to  year,  and  worked 
the  mine  as  before.  In*  1847  A.  died,  leaving  C.  his 
executor,  and  bequeathing  an  interest  in  the  mine  to 
D.  B.,  after  the  death  of  A.,  worked  the  mine  alone, 
claiming  it  as  his  own  entirely,  and  refusing  to  give 
any  account  to  C,  who,  however,  constantly  pressed  for 
one.  In  1850  B.  negotiated  for  and  obtained  from  the 
landlord  a  new  lease,  but  on  more  onerous  terms  than 
before.  Of  this  C.  had  no  notice.  After  the  new  lease, 
B.,  who  since  the  death  of  A.  had  only  kept  the  mine 
going,  began  to  work  it  in  earnest  and  at  a  profit  ;  and 
in  1851  D.  filed  a  bill  against  B.  and  C.  to  establish  his 
interest  in  the  mine.  C.  admitted  D.'s  title,  but  B. 
put  in  no  answer,  and  the  suit  was  not  prosecuted.     In 

1853  B.  died   and  C.  became  his  representative.      In 

1854  the  plaintiff,  who  was  the  assignee  of  D.'s  interest, 
filed  a  bill  in  the  nature  of  a  supplemental  bill  to  D.'s 
former  bill,  and  sought  to  have  D.'s  interest  in  the 
mine  secured  for  his,  the  plaintiff's  benefit.  C,  who 
as  the  representative  of  A.  had  admitted  D.'s  right  in 
his  suit,  now,  as  representative  of  B.,  opposed  the  plain- 
tiff's claim,  and  insisted  on  lapse  of  time  as  a  defence 
to  the  suit.  But  it  was  held,  (1),  that  on  A.'s  death, 
his  interest  in  the  mine  did  not  determine;  (2),  that 
his  estate  was  entitled  to  share  the  benefit  of  the  re- 
newed lease  :  (3),  that  A.  s  representative  was  not  pre- 
cluded in  1853  from  asserting  this  right  against  B., 
inasmuch  as  B.  had  kept  A.'s  representative  in  ignorance 
of  the  real  state  of  the  concern  ;  and,  (4),  that  there 
had  been  no  laches  on  the  part  of  the  plaintiff  or  of 
D.,  through  whom  he  claimed,  inasmuch  as.  since  1851, 
there  had  been  a  bill  on  the  file  to  secure  their  interest. 

Lastly,  on  the  subject  of  laches  it  may  be  observed 

(m)  Ante,  p.  469. 

(»)  2  De  G.  &  J.  173,  and  24  Beav.  333. 


SPECIFIC  PERFORMANCE.  £47 


that,  as  positive  evidence  of  abandonment  materially  Bk.  III. 
strengthens  the  case  of  those  resisting  a  stale  demand,  Chap.  10. 
so,  on  the  other  hand,  positive  evidence  of  recognition 


affords  an  answer  to  a  defence  grounded  on  laches  and  Effect  of 
lapse  of  time.     Thus,  where  a  shareholder  in  a  com-  recognition 
pany  became  bankrupt,  but  his  shares  were  carried  in  ot  title 
the  books  of  the  company  to  a  separate  account,  and  he 
was  regularly  credited  with  the  dividends  which  became 
payable   in  respect  of  those  shares,  his  assignees  were 
held  entitled  to  the  shares  and  accumulated  dividends, 
although  *  twenty  years  had  elapsed  since  any  claim  [  *  475] 
had  been  made  to  them  (o). 

Notwithstanding  Hart  v.  Clarke  and  Clements  v.  Result  of  the 
Hall,  it  is  submitted  that  the  doctrine  laid  down  and  cases, 
acted  upon  in  Norway  v.  Rou%  Senhouse  v.  Christian, 
Prenclergast  v.  Turton,  Clegg  v.  Edmonson,  and  Rule  v. 
Jewell  may  still  be  safely  relied  on  in  all  cases  except 
those  in  which  the  court  can  be  driven,  as  it  was  in  Hart 
v.  Clarke,  to  the  alternative  of  holding  either  that  the 
plaintiff  is  entitled  to  relief,  or  that  he  has  abandoned 
and  lost  his  former  legal  status  (p). 

Laches  if  relied  on  as  a  defence  to  an   action  ought  Demurrer  on 
to  be  expressly  pleaded  ;  it  cannot  be  taken  advantage  the  ground 
of  by  demurrer,  or  its  modern  equivalent,  if  it  can  only  of  laches 
be  made  out  inferentially  from  the   statements  in   the 
claim  (q). 


Section  IV. — Actions  for  Specific  Performance. 

If  two  persons   have  agreed  to  enter  into  partner-  General  rule 
ship,  and  one  of  them  refuses  to  abide   by  the   agree-  against 
ment,  the  remedy  for  the  other  is  an  action  for  damages,  specific  Per" 
and  not,  excepting  in  the  cases  to  be  presently  noticed,  a^^ents 
for  specific  performance.     To  compel  an  unwilling  per-  for  partner- 
son  to  become  a  partner  with   another  would  not  be  shiP 
conducive  to  the  welfare  of  the  latter,  any  more  than 
to  compel  a  man   to   marry  a   woman   he  did  not  like 
would  be  for  the  benefit  of  the  lady.     Moreover,  to  de- 
cree specific  performance  of  an  agreement  for  a  part- 
Co)  Penny  r.  Pickwick,  16  Beav.   246.     See,  too,  the  recogni- 
tion of  title  in  Clements  v.  Hall,  ante,  p.  473. 

{p)  See,  also.  Garden  Gully,  &c,  Co.  v.  McLister,  1  App.  Ca. 
39,  which  shows  that  in  such  a  case  as  Hart  v.  Clarke,  something 
more  than  mere  laches  is  necessary  to  deprive  a  plaintiff  of  re- 
lief. In  Beningfield  v.  Baxter,  12  App.  Ca.  167,  there  was  a  fi- 
duciary relation. 

(q)  See  Deloraine  v.  Browne,  3  Bro.  C.  C.  633;  Mitf.  PI.  212; 
Turner  v.  Borlase,  11  Sim.  17. 


548  ACTIONS  BETWEEN  PARTNERS. 

Bk.  III.  nersbip    at   will  would  be   nugatory,   inasmuch    as    it 

Chap.  10.        mjght  be  dissolved  tbe  moment  after  the  decree  was 
Sect"  4'  made  ;  and  to  decree  specific  performance  of  an  agree- 

ment for  a  partnership  for  a  term  of  years  would  in- 
volve the  court  in  the  superintendence  of  the  partner- 
ship throughout  the  whole  continuance  of  the  term. 
[*476]  As  a  rule,  *  therefore,  courts  will  not  decree  specific 
performance  of  an  agreement  for  a  partnership  (r).1 
Nor  will  specific  performance  be  decreed  of  an  agree- 
ment to  become  a  partner  and  bring  in  a  certain  amount 
of  capital,  or  in  default  to  lend  a  sum  of  money  to  the 
plaintiff  (s). 
Cases  in  However,  if  the  parties  have  agreed  to  execute  some 

which  a  formal  instrument  which  would  have  the  effect  of  con- 

decree  will  ferrjng  rigbts  which  do  riot  exist  so  long  as  the  agree- 
ment ts  not  carried  out,  in  such  a  case,  and  for  the  pur- 
pose of  putting  the  parties  into  the  position  agreed 
upon,  the  execution  of  that  formal  instrument  may  be 
decreed,  although  the  partnership  thereby  formed  might 
be  immediately  dissolved  (t).  The  principle  upon 
which  the  Court  proceeds  in  a  case  of  this  description, 
is  the  same  as  that  which  induces  it  to  decree  execu- 
tion of  a  lease  under  seal,  notwithstanding  the  term 
for  which  the  lease  was  to  continue  has  already  ex- 
pired (it). 
England  v.  In  England  v.  Curling  (a?),  the  plaintiff  and  two  of 

Curling.  the    defendants    agreed    to    become    partners    as  ship 

agents,  for  seven,  fourteen,  or  twenty-one  years,  and 
they  signed  with  their  initials  an  agreement  to  that 
effect.  A  deed  was  prepared  to  carry  out  the  agree- 
ment ;  the  deed,  however,  was  never  executed,  and  it 
differed  somewhat  from  the  agreement.  The  parties 
carried  on  business  as  partners  under  the  agreement  for 
eleven  years,  and  then  they  began  to  quarrel.  The  defend- 
ant Curling,  who  appears  to  have   been   in  the  wrong 

(r)  Scott  v.  Raynient,  7  Eq.  112;  Hercy  v.  Birch.  9  Ves.  357; 
Sheffield  Gas,  &c,  Co.  v.  Harrison,  17  Beav.  294;  Downs  v.  Col- 
lins, 6  Ha.  418.  See,  also,  Maxwell  v.  The  Port  Tenant  Co.,  24 
Beav.  495,  and  Vivers  v.  Tuck,  1  Moore,  P.  C.  N.  S.  516,  where, 
however,  there  was  fraud.  See,  generally,  Fry  on  Spec.  Perf.  pt. 
vi.  ch.  3,  ed.  2. 

(s)  Sichil  v.  Mosenthal,  30  Beav.  371. 

(t)  Buxton  v.  Lister,  3  Atk.  385,  and  see  1  Swanst.  513,  note, 
and  Stocker  v.  Wedderburn,  3  K.  &  J.  403. 

(u)  See  Wilkinson  v.  Torkington,  2  Y.  &  C.  Ex.  72(5,  and  the 
cases  there  cited. 

(x)  8  Beav.  129.  See  the  observations  of  Lord  Rornilly  on  this 
case,  in  30  Beav.  376. 

1  Meason  v.  Kane,  63  Pa.  St.  335  (1869);  Reid  v.  Vidal.,  5  Rich. 

Eq.  289  (1852);  Morris  v.  Peckham,  51  Conn.  128  (1883). 


SPECIFIC  PERFORMANCE.  549 

from  the  beginning,  gave  notice  to   dissolve  in   three  Bk.  III. 
months  ;  he  retired  from  the  partnership,  and  entered  Chap.  10. 

into   partnership  with   other  persons,  and  carried    on ! ! 

business  with  them  on  the  premises  and  in  the  name  of 
the  old  firm.  The  new  firm  opened  the  *  letters  ad-  [*477j 
dressed  to  the  old  one,  and  gave  notice  of  its  dissolu- 
tion to  its  correspondents.  The  plaintiff  then  filed  a 
bill  for  specific  performance  and  an  injunction,  and  he 
obtained  a  decree  (y). 

The  only  other  class  of  cases  in  which  anything  like  Specific  per- 
specific  performance  of  an  agreement  for  a  partnership  where  an 
will  be  decreed,  is  where  a  person  who  has  agreed  with  account  only 
another  to  share  the  profits  of  some  joint  adventure,  is  wanted, 
seeks  to  obtain  that  share  after  the  adventure  has  come 
to  an  end.     Although  the  decree  giving  him  the  relief 
he  asks  may  be  prefaced  by  declaration  that  the  agree- 
ment relied  upon  ought  to  be  specifically  performed, 
this  has  not  the  effect  of  creating  a  partnership  to  be 
carried  on    by   the  litigants,   but  merely   serves  as  a 
foundation  for  the  decree  for  an  account,  which  is  the 
substantial  part  of  what  is  sought  and  given.     An  in- 
stance of  this  class  of  cases  is  afforded  by  Dale  v.  Ham-  Dale  r. 
ilton(z).      There,  in  substance,  three  persons  had  agi'eed     ami   on- 
to  purchase  land;  to  build  on   it  and   improve  it;  and 
then  to  sell  it  for  their  common  benefit.      Land  was  ac- 
cordingly obtained,  built  upon  and  improved,  and  sub- 
sequently the  right  of  one  of  the  three  persons  to  any 
share  in  the  adventure  was  denied   by  the   other  two. 
He  thereupon  filed  a  bill  for  a  sale  of  the  land,  for  an 
account  of  the  joint  speculation,  and  for  a  proper  dis- 
tribution of  the  monies  arising  from  the  sale;  and  the 
Court  held  him  entitled  to  this  relief. 

Another  instance  of  the   same   kind  is   afforded   by  Webster  v 
Webster  v.  Bray   a).     In  that  case  the  plaintiff  and  the  Bray. 
defendant  had  been  jointly  retained  as  solicitors  to  a 


(#)  The  following  was  the  minute  of  the  decree  : — "The Court 
doth  declare  that  the  agreement  for  a  co-partnership,  dated.  &c, 
is  a  binding  agreement  between  the  parties  thereto,  and  ought 
to  be  specifically  performed  and  carried  into  execution,  and  doth 
order  and  decree  the  same  accordingly.  Refer  it  to  the  Master 
to  inquire  whether  any  and  what  variations  have  been  made  in 
the  said  agreement  by  and  with  the  assent  of  the  several  parties 
thereto  since  the  date  thereof.  Let  the  Master  settle  and  ap- 
prove of  a  proper  deed  of  co-partnership  between  the  said  par- 
ties in  pursuance  of  the  said  agreement,  having  regard  to  any 
variations  which  he  may  find  to  have  been  made  in  the  said 
agreement  as  hereinbefore  directed,  and  let  the  parties  execute  it. 
Continue  the  injunction  against  the  defendant  Curling." 

(z)  5  Ha.  369,  and  2  Ph.  266. 

(a)  7  Ha.  159. 


Sect.  4. 


550  ACTIONS  BETWEEN  PARTNEKS. 

|  *  478]        company.     They  were  *not  in  partnership  as  solicitors 
ilk.  III.  generally,  but  the  plaintiff  insisted  that  they  were  part- 

Chap.  10.        ners  as  regarded  the  business  done  for  the  company,  and 

<ur.+  O  Til  11 

.  tbat  the  payments  made  by  the  company  to  eacb  ought  to 
be  shared  by  both.  The  defendant  insisted  that  there  was 
no  partnership,  and  that  each  was  to  be  paid  for  the  work 
done  by  himself,  and  to  retain  for  his  own  benefit  all  pay- 
ments in  respect  of  such  work.     The  plaintiff  having  re- 
signed, filed  a  bill  for  an  account,  and  the  Court  made  a 
decree  in   his   favour,  declaring  that  the  plaintiff  and 
the  defendant  were  jointly  and  equally   interested  in 
the  profits  and  loss  of  the  business  transacted  by  them, 
or  either  of  them,  as  solicitors  to  the  company  (b).1 
Other  cases         Relief  in   the  shape  of  specific  performance  may  be 
of  specific       required  for   other  purposes  besides  carrying  into  exe- 
perforniance    Cution   agreements  to   form  partnerships.      The  assist- 
nartners  ance  of  a  Court  is  often  requisite  to  compel  those  en- 

gaged in  a  going  concern,  to  act  conformably  to  the 
articles  of  partnership;  and  also  to  compel  those  who 
have  dissolved  partnership,  to  observe  the  stipulations 
into  which  they  have  entered;  The  principles  on  which 
the  Courts  act  in  granting  or  withholding  assistance 
when  sought  for  the  former  purpose,  will  be  considered 
hereafter;  and  with  respect  to  the  specific  performance, 
after  a  dissolution  of  partnership,  of  agreements  en- 
tered into  by  the  partners  previously  to,  or  at  the  time 
of  dissolution,  it  need  only  be  observed  that  relief  will 
be  granted  or  refused  upon  the  principles  by  which  the 
Court  is  ordinarily  guided  in  question  of  specific  per- 
formance, and  that  nothing  turns  on  the  circumstance 
of  the  IMigants  having  been  partners.  It  would,  there- 
fore, be  foreign  to  the  objects  of  the  present  treatise  to 
prosecute  this  subject  further;  but  for  purposes  of  refer- 
ence, it  may  be  useful  to  mention  that  the  Court  has 
enforced  the  following  agreements  entered  into  upon  or 
with  a  view  to  a  dissolution;  namely — 

Agreements  not  to  carry  on  business  within  a  certain 
distance  or  for  a  certain  space  of  time  (c);2 

(6)  Robinson  v.  Anderson,  20  Beav.  98,  and  7  De  G.  M.  &  G. 
239  is  a  similar  case. 

(c)  Whittakeru  Howe,  3  Beav.  383;  Turner  v.  Major,  3  Giff. 
442:  and  see  Coates  v.  Coates,  6  Madd.  287,  and  Williams  v.  Wil- 
liams. 1  Wils.  Ch.  473,  note. 

1  An  agreement  between  two  partners  that  one  shall  convey 
land  so  that  on  it  partnership  buildings  may  be  erected  either 
at  their  joint  expense  or  at  tne  cost  of  the  complainant,  will  be 
enforced  specifically;  Birchett  v.  Boiling.  5  Mnnf.  (Va.)  442 
(1817);  Whiteworth  v.  Harris.  40  Miss.  483  (1806'. 

2  Ropes  v.  Upton,  125  Mass.  258  (1878). 


ACTIONS  FOR  MISREPRESENTATION  AND  FRAUD.  551 

*  Agreements  as  to  the  custody  of  partnership  books  [  *  479] 
and  the  furnishing  of  copies  thereof  (d);  Bk.  III. 

Agreements  that  a  third  party,  and  he  only,  shall  get  Chap.  10. 
in  debts  (e);  

Agreements  that  the  value  of  the  share  of  an  out- 
going or  a  deceased  partner,  shall  be  ascertained  in  a 
specified  way  and  taken  accordingly  (/  );' 

Agreements  that  an  outgoing  partner  shall  offer  his 
share  to  his  co-partners,  before  selling  it  to  other  per- 
sons (g); 

Agreements  to  grant  an  annuity  to  a  retiring  part- 
ner and  his  widow  (h) ; 

Agreements  not  to  divulge  or  make  use  of  a  trade 
secret  (i). 


Section  V. — Actions  for  Misrepresentation  and  Fraud. 

1.    General  observations. 

The  proper  remedy  for  a  person  who  has  been  in- 
duced by  fraud  to  become  a  partner  with  another,  de- 
pends in  the  hrst  place  on  who  the  person  is  who  com- 
mitted the  fraud.  Speaking  generally  and  subject  to 
certain  qualifications  which  will  be  noticed  hereafter, 
if  the  fraud  complained  of  has  been  committed  by  the 
other  partner,  the  person  defrauded  has  the  *  option  of  [  *  480] 
affirming  or  of  rescinding  the  contract  into  which  he 
has  been  induced  to  enter;  and  whether   he  affirms  it 


(d)  Lingen  v.  Simpson,  1  Sim.  &  Stu.  600,  and  see  Whittaker 
v.  Howe,  3  Beav.  383. 

(e)  Davis  v.  Amer,  3  Drew.  64  ;  Turner  r.  Major,  3  Giff.  442. 
(/)  Morris?;.  Kearsley,  2   Y.  &  C.  Ex.    139;  Essex  v.   Essex," 

20  Beav.  442  ;  King  v.  Chuck,  17-  Beav.  325  ;  and  see  Feather- 
stonhaugh  v.  Turner,  25  Beav.  382,  and  Gibson  v.  Goldsmid,  5 
De  G.  M.  &  G.  757,  reversing  S.  C.  18  Beav.  584.  Compare 
Downs  v.  Collins,  6  Ha.  418,  where  to  have  enforced  the  agree- 
ment would  have  been  to  decree  specific  performance  of  a  con- 
tract for  a  partnership  ;  and  Cooper  v.  Hood,  7  W.  R.  83,  where 
a  decree  was  refused  on  the  ground  that  the  agreement  sought 
to  be  enforced  was  too  vague  in  its  terms.  See,  as  to  agreements 
for  a  valuation,  ante,  p.  432. 

(g)  Homfray  v.  Fothergill,  1  Eq.  567. 

(h)  Aubin  v.  Holt,  2  K.  &  J.  66  ;  Page  v.  Cox,  10  Ha.  163. 
See,  also,  Murray  V.  Flavell.  25  Ch.  D.  89,  and  Bonville  v.  Bon- 
ville,  6  Jur.  N.  S.  414,  M.  R.,  where  the  agreement  sued  upon 
was  decided  not  to  bear  the  construction  contended  for  by  the 
plaintiff. 

(i)  Morrisson  v.  Moat,  9  Ha.  241. 

1  Maddock  v.  Astbury,  32  N.  J.  Eq.  181  (1880). 


552  ACTIONS  BETWEEN  PARTNERS. 

Bk.  III.  or  disaffirms  it  he  is  entitled  to  damages   fcr  any  loss 

Chap.  10.        which  he  may  have  sustained  by  reason  of  the  fraud  (A;).1 

^__^1_ But  if  the  fraud   has   been   committed   by  some   third 

person  and  is  not  in  point  of  law  imputable  to  the 
other  partner,  then  the  person  defrauded  has  no  such 
option;  he  cannot  rescind  the  contract:  he  can  only 
sue  those  who  defrauded  him  for  damages.2  But  it 
will  be  observed  from  this  general  statement  that  in 
cases  of  this  class  there  is  always  a  preliminary  ques- 
tion to  be  considered,  and  which,  if  negatived,  leaves 
the  complainant  without  any  redress  at  all:  that  ques- 
tion is,  Has  he  in  fact  been  induced  by  fraud  to  enter 
into  the  contract  of  which  he  complains  ?  On  this  pre- 
liminary question  a  few  observations  may  be  useful. 
1.  Untruth  No  attempt  is  ever  made  to  give  any  precise  defini- 

necessary.  tion  of  fraud,  or  to  restrict  by  words  the  circumstances 
which  may  be  regarded  as  amounting  to  it  in  point  of 
law.  New  cases  of  fraud  must  always  be  met  by  new 
decisions.  But  by  the  law  of  this  country  a  sharp  line 
is  drawn  between  a  breach  of  a  promise  or  the  disap- 
pointment of  hopes  raised  by  the  expression  of  inten- 
tions or  expectations,  on  the  one  hand,  and  an  untrue 
statement  on  the  other  (I) ;  and  speaking  generally  there 
is  no  fraud  sufficient  to  support  an  action  for  damages 
or  to  set  aside  a  contract  in  the  absence  of  some  untrue 
statement  of  fact  or  of  some  concealment  of  fact  which 
makes  what  is  stated  substantially  untrue  (in). 

(k)  Small  v.  Attwood,  You.  507,  and  6  CI.  &  Fin.  232  ;  Puls- 
ford  v.  Richards,  17  Bear.  87  ;  Cruikshank  v.  Mc  Vicar,  8  Beav. 
106.  And  see  Beck  v.  Kantorowiez,  3  K.  &  J.  230,  and  cases  of 
that  class. 

(7)  See  Jordan  v.  Money,  5  H.  L.  C.  185  :  Harris  v.  Xukerson, 
L.  R.  8  Q.  B.  286  ;  Smith  r.  Chadwick,  9  App.  Ca.  187.  Houlds- 
worth  v.  City  of  Glasgow  Bank,  5  App.  Ca.  317.  is  not  opposed  to 
"this;  it  turned  on  the  statutory  enactments  relating  to  the  wind- 
ing up  of  companies. 

(m)  See  as  to  concealment,  New  Sombrero  Phosphate  Co.  v, 
Erlansier.  3  App.  Ca.  1218,  and  5  Ch.  D.  73  ;  Peek  v.  Gurnev.  L. 
R.  6  H.  L.  377,  and  13  Eq.  79;  Central  Rail,  of  Venezuela  v. 
Kisch,  L.  R.  2  H.  L.  99;  Oakes  r.  Turquand,  ih.  325:  New 
Brunswick,  &c,  Rail.  Co.  v.  Muggeridge,  1-Dr.  &  Sm.  381.  See, 
also,  Gover's  case,  1  Ch.  D.  182,  and  the  judgment  of  Fry,  J.,  in 
Davies  v.  Lon.  &  Prow  Marine  Ins.  Co.,  8  Ch.  D.  474. 

1  Rice  v.  Culver.  32  X.  J.  Eq.  601  (1880)  :  Morse  ?-.  Hutchins, 
102  Mass.  439  (1869)  :  Greenewald  v.  Rathfon,  81Ind.  547(1873). 
In  St.  John  v.  Hendrickson,  81  Ind.  350  (1873),  it  was  held  that 
if  A.  is  lured  into  a  partnership  by  fraud,  but  is  subsequently 
informed  of  the  facts  and  he  ratines  the  contract,  he  can  there- 
after neither  rescind  it  nor  recover  damages  for  the  fraud. 

2  See  Kimmins  v.  Wilson,  8  W.  Va.  584  (1875).  See  also  Perry 
v.  Hale,  143  Mass.  540  (1887),  where,  in  an  action  at  law  in  tort, 
it  was  held  that  only  the  guilty  partnerscould  be  made  defendants. 


ACTIONS  FOR  MISREPRESENTATION  AND  FRAUD.  553 

*  In  the  next  place  the  untrue  statement  must  relate  [  *  481] 
to  some  material  ma*tter,  and  have  been  made   to  the  Bk.  III. 
complainant  directly,  or  indirectly  as  one  of  the  pub-  gecatp510' 
lie    (n),    and    have    been    in    fact    relied     upon    by 


him  (o).  2-  Untruth 

Whether  the  untrue  statement  must  have  been  untrue  must  be  ma- 

,  ,    ,  „    .,  i  ■  •  ,    i  •  tenal  and 

to  the  knowledge  of  the  person  making  it  has  given  have  |>een 

rise  to  much  controversy.      If,   indeed,  he  had  no  honest  relied  upon, 
belief  in  its  truth  his  ignorance   of  its  untruth  is    im-  3.  Whether 
material.       But   if   he  honestly  believed  it   to  be   true,  the  untruth 
courts  of  law  and  courts  of  equity  have  taken  different  must  have 
views.      It  seems,  however,  now  to  be   settled    that,  ex-  at  the  time 
cept  under  special  circumstances,  an  action  for  damages 
will  not  lie  in  such  a  case,  although  an  action  to  rescind 
a  contract    founded  on   the    statement  can  be    main- 
tained    (p).       These    two    classes    of  actions    require 
further  notice. 

2.   Actions  for   damages. 

Where  a  person  has  been  induced  by  the  false  and  Actions  for 
fraudulent  representations    of    another    to    enter    into  nrisrepresen- 
partnership  with  him,  an  action  will  clearly  lie  at  the   a  luu' 
suit  of  the  first  person  against  the  second  for  the  re- 
covery of  damages  in  respect  of  such  fraud  (q).1    And 
if  false  representations  are  made  by  means  of  adver- 
tisements issued  for  the  purpose  of  inducing  persons 
to  take  shares,  &c,  any  persons  who  is  ensnared  by 
those  advertisements,   and  acts  on  the  faith  of  them, 
may  maintain  an    action    against    those   persons   who 
caused    them   to  be  published,  knowing    them    to    be 

(n)  That  this  is  sufficient,  see  Clarke  v.  Dickson,  6  C.  B.  N.  S. 
453. 

(0)  See  Smith  v.  Chadwick,  9  App.  Ca.  187  ;  Bellairs  v.  Tuck- 
er, 13  Q.  B.  D.  562  ;  Pulsford  v.  Richards,  17  Beav.  87,  and 
others  of  that  class.  In  the  remarkable  case  of  the  Panama 
and  South  Pacific  Telegraph  Co.  v.  India  Rubber  Co.,  10  Ch. 
515,  it  was  held  that  a  contract  might  be  rescinded  for  fraud 
subsequent  to  itsdate,  but  rendering  its  performance  impossible. 

(p)  Ante,  pp.  103  et  scq.  Slim  v.  Croucher,  1  De  G.  F.  &  J. 
518,  has  not  been  followed.  The  Court  apparently  thought  that 
an  action  for  damages  might  have  been  maintained  at  law.  In 
support  of  the  statement  in  the  text,  see  Arkwright  v.  Newbold, 
17  Ch.  D.  301  ;  Redgrave  v.  Hurd,  20  Ch.  D.  1  ;  Newbigging  v. 
Adam,  34  Ch.  D.  582.  As  to  misrepresentations  of  authority,  see 
Firbank's  Ex.  v.  Humphreys,  18  Q.  B.  D.  54,  and  the  cases  there 
cited. 

(g)  See  the  cases  in  the  next  two  notes,  and  Dobell  v.  Stevens, 
3  B.  &  C.  623. 

•Morse  v.  Hutchins,  102  Mass.  439  (186J);  Greenewald  v. 
Rathfon,  81  Iud.  547  (1882). 


554 


ACTIONS  BETWEEN  PARTNERS. 


[*482] 
Bk.  III. 
Chap.  10. 
Sect.  5. 


Rescission  of 
contracts  of 
partnership. 


Pillans  v. 
Harkness. 


false  (r).  In  order  to  maintain  an  action  *  for  mis- 
representation, it  is  not  neccessary  that  there  should 
have  been  any  direct  communication  between  the  de- 
fendant and  the  plaintiff  (s). 

3.  Actions  for  rescission  of  contract. 

"Where  a  person  is  induced  by  the  false  representa- 
tions of  others  to  become  a  partner  with  them,  the 
Court  will  rescind  the  contract  of  partnership  at  his 
instance  ;  and  will  compel  them  to  repay  him  whatever 
he  may  have  paid  them,  with  interest,  and  to  indemnify 
him  against,  all  the  debts  and  liabilities  of  the  partner- 
ship, and  if  the  defendants  have  been  guilty  of  fraud 
against  all  claims  and  demands  to  which  he  may  have 
become  subject  by  reason  of  his  having  entered  into 
partnership  with  them,  he  on  the  other  hand  accounting 
to  them  for  what  he  may  have  received  since  his  entry 
into  the  concern  (t).1 

The  case  of  Pillans  v.  Harkness  (u)  affords  a  good 
example  of  this.  In  that  case  the  plaintiff  was  induced 
by  the  fraud  of  the  defendants  to  enter  into  partner- 
ship with  them  in  a  fishing  business.     They  got  money 

(r)  Eddington  v.  Fitzmaurice,  29  Ch.  D.  459.  Compare  Smith 
v.  Chad  wick,  9  App.  Ca.  187  ;  Bellairs  v.  Tucker,  13  Q.  B.  D. 
562.  Older  cases  are  Davidson  v.  Tulloch,  3  McQu.  783 ;  Cullen 
v.  Thompson's  Trustees  &  Kerr,  4  ib.  424 ;  Bale  v.  Cleland,  4 
Fos.  &  Fin.  117:  Gerhard  v.  Bates,  2  E.  &  B.  476;  and  see 
Denton  v.  The  Great  North.  Rail.  Co.,  5  E.  &  B.  860  ;  Wat- 
son v.  Charlemont,  12  Q.  B.  856. 

(s)  See  Clarke  v.  Dickson,  6  C.  B.  N.  S.  453  ;  and  see  Bedford 
v.  Bagshaw,  4  H.  &  N.  538. 

(t)  See,  in  addition  to  the  cases  noticed  in  the  text,  Ex  parte 
Broome,  1  Rose,  71,  and  1  Coll.  598,  note  ;  Hamil  v.  Stokes,  Dan. 
20  and  4  Price,  161  ;  Stainbank  v.  Fernley,  9  Sim.  556  ;  Jauncey 
v.  Knowles,  8  W.  R.  69.  Clifford  v.  Brooke,  13  Ves.  131,  was  not 
a  case  of  this  class  ;  the  plaintiff  there  sought  to  recover  money 
which  he  had  paid,  not  for  the  admission  of  himself,  but  for  the 
admission  of  his  brother  into  partnership  with  the  defendants. 
The  plaintiff's  remedy  under  these  circumstances  was  held  to 
be  by  an  action  at  law. 

(m)  Colles,  442  (called  Harkness  v.  Steward,  and  Steward  v. 
Harkness,  in  the  table  of  cases  to  the  Dublin  edit,  of  1789). 

1  Richards  v.  Todd.  127  Mass.  1 67  (1879).  In  Howell  v.  Harvey,  5 
Ark.  270  (1843)and  HynestJ.  Stewart,10  B.  Mon.  429(1850)  thedoc- 
trine  is  applied  that  where  one  has  been  induced  to  enter  a  part- 
nership through  false  representations  fraudulently  made,  the 
articles  of  agreement  will  be  cancelled  and  declared  void.  In  order 
to  warrant  a  rescission  of  the  partnership  agreement,  the  fraud 
complained  of,  must  relate  to  the  formation  of  the  firm  and  not 
arise  in  any  other  matter.  Ingraham  v.  Foster,  31  Ala.  123 
(1857). 


RESCISSION  FOR  FRAUD.  555 

from  him  but  contributed  nothing    themselves  ;  they  Bk.  III. 
nevertheless  induced  him  to  sign  a  deed,  statins:  that  CnaP-  10- 

they  had  brought  in  their  shares  of  capital.     They  de-         '    ' 

ceived  him  for  two  years  and  referred  him,  when 
pressed,  to  books  which,  when  examined,  were  found 
without  any  entry  in  them.  The  plaintiff  then  filed  a 
bill  against  his  partners  for  a  *  discovery  of  their  [  *  483] 
transactions  and  for  the  recovery  of  his  money  (x). 
The  Chancellor  decreed  them  to  account  for  all  monies 
paid  by  the  plaintiff  to  them  or  either  of  them, 
and  to  pay  what  should  appear  due  to  him  with  inter- 
est, the  plaintiff  to  be  absolutely  discharged  from  the  ar- 
ticles, agreements,  and  partnerships,  the  defendants  to 
indemnify  him  from  all  costs  and  damages  whatsoever 
touching  the  articles,  or  any  partnership  in  respect 
thereof,  and  to  pay  the  costs  of  the  suit.  This  decree 
was  affirmed  on  appeal  to  the  House  of  Lords. 

Another  case  of  the  same  description  is  Raivlins  v.  Although  the 
Wickham  (y).  There  the  plaintiff  was  induced  by  the  plaintiff 
misrepresentations  of  two  persons,  A.  and  B.,  to  enter  n".gh*  *iaV| 
into  partnership  with  them  as  bankers,  and  he  and  the  truth, 
they,  after  carrying  on  their  business  for  four  years,  Rawlins  v. 
transferred  it  to  other  parties.  Shortly  after  this  Wickham. 
transfer,  the  plaintiff  for  the  first  time  became  aware 
of  the  falsity  of  the  statements  by  which  he  had  been 
induced  to  become  a  partner.  He  brought  an  action 
against  A.  and  B.  for  their  misrepresentations;  pend- 
ing the  proceedings  at  law,  A.  died,  but  the  action  was 
continued  against  B.,  and  a  verdict  agrJnst  him  for 
damages  was  obtained.  After  the  verdict  B.  became 
insolvent,  and  thereupon  the  plaintiff  filed  a  bill  against 
B.  and  the  executors  of  A.,  praying  that  the  partner- 
ship into  which  he  had  entered  might  be  declared  void, 
that  the  partnership  articles  might  be  cancelled,  that 
the  defendants  might  be  decreed  to  repay  him  the  sum 
paid  by  him  on  entering  into  the  partnership,  with  in- 
terest, and  to  execute  a  sufficient  indemnity  against  the 
outstanding  debts  and  liabilities,  which  the  plaintiff 
had  or  might  become  subject  to,  in  respect  of  the  deal- 
fa)  The  defendants  relied  on  the  lapse  of  time  and  laches 
and  acquiescence  on  the  part  of  the  plaintiff;  and  particularly 
on  the  fact  that  he  had  entered  into  another  agreement  with 
them  to  the  effect  that  the  defendants  should  become  partners  in 
another  fishing  concern  and  share  their  profits  in  that  with  the 
plaintiff,  and  that  such  partnership  had  been  entered  into.  The 
evidence,  however,  failed  to  show  that  the  plaintiff  had  any 
knowledge  of  this  alleged  other  partnership,  or  that  he  was  aware 
of  what  had  been  going  on,  until  shortly  before  he  filed  his  bill. 
(y)  1  Griff.  355,  aud  3  De  G.  &  J.  304. 


550 


ACTIONS  BETWEEN  PARTNERS. 


Bk.  III. 

Chap.  10. 
Sect.  5. 

[*484] 


Newbigging 
r.  Adam. 


Extent  of 
indemnity. 

Mycock  v. 
Beatson. 

Lien  for 
purchase 

money,  &c. 


Rescission  of 

contracts 
made  on  a 
dissolution 
of  partner- 
ship. 


ings  and  transactions  of  the  partnership,  and  for  an 
account  of  such  debts  and  liabilities,  and  of  the  mon- 
ies already  paid  *  by  the  plaintiff  on  account  of  the 
partnership  debts,  and  for  repayment  of  such  monies 
with  interest.  A  decree  was  made  in  the  plaintiff's 
favour,  and  an  appeal  by  A.'s  executors  was  dismissed. 
In  this  case  the  deceased  partner  had  clearly  been  a 
party  to  the  misrepresentation;  and  although  it  was 
proved  that  he  was  ignorant  of  the  real  truth,  and  had 
not  stated  that  to  be  true  which  he  knew  to  be  false, 
still  it  was  held  that  he  ought  not  to  have  stated  what 
he  did  not  know  to  be  true,  and*  that  he  was  answera- 
ble for  the  falsity  of  his  own  assertions.  It  was  also 
held  that  the  plaintiff  was  entitled  to  assume  that  the 
statements  made  to  him  were  true  until  he  had  reason 
to  suppose  that  they  were  not;  and  that  it  was  no 
answer  to  him  that  if  he  had  examined  the  partnership 
books  he  would  have  discovered  the  true  state  of  af- 
fairs (z). 

Neivbigging  v.  Adam  (a)  and  Mycock  v.  Beatson  (b) 
are  more  recent  illustrations  of  the  same  doctrine.  In 
the  first  of  these  cases  it  was  held  that  where  there  is  a 
right  to  rescind  for  misrepresentation,  but  not  fraudu- 
lent, the  right  of  the  plaintiff  to  indemnity  is  less  ex- 
tensive than  it  is  where  he  is  in  a  position  to  claim 
damages  for  a  fraudulent  misrepresentation.  In  the 
second  of  the  above  cases  the  plaintiff  was  held  enti- 
tled to  a  lien  on  the  partnership  assets  (after  satisfy- 
ing the  debts  and  liabilities)  for  the  money  he  had  paid 
on  entering  into  the  partnership;  and  also  to  stand  in 
the  place  of  any  creditor  of  the  partnership  whom  he 
paid  off. 

Besides  being  called  upon  to  rescind  agreements  for 
the  formation  of  a  partnership,  Courts  are  frequently 
applied  to  by  partners,  or  those  claiming  under  them, 
to  rescind  agreements  of  other  descriptions,  and  espe- 
cially agreements  come  to  on  or  after  a  dissolution. 

(z)  See.  also,  Jauncey  v.  Knowles,  8  W.  R.  69,  where  there 
was  also  means  of  knowledge.  Compare  Jennings  v.  Broughton, 
17  Beav.  234,  and  5  De  G.  M.  &  G.  126.  where  the  plaintiff  did 
not  rely  on  the  defendant's  statements. 

(a)  84  Ch.  D.  582.  The  defendants  were  declared  "jointly 
and  severally  bound  to  indemnify  the  plaintiff  against  all  out- 
standing debts,  claims,  demands,  and  liabilities,  which  the 
plaintiff  had  become  or  might  become  subject  to,  or  be  liable  to 
pay  for  or  on  account  or  in  respect  of  the  dealings  and  transac- 
tions of  the  partnership:"  not  necessarily  equivalent  to  an  in- 
demnity against  the  consequences  of  having  entered  into  the 
partnership.     See  the  judgment  of  Bowen,  L.  J. 

{b)  13  Ch.  D.  384. 


RESCISSION  FOR  FRAUD.  557 

*  Supposing  every  member  of  a  firm  to  be  sui  juris,  [  *  485] 
any  one  may  retire  upon  any  terms  to  which   he  and  Bk.  III. 
his  co-partners  may  choose  to  assent  ;  and  if  there  is  ^catp'510' 
no  fraud  or  concealment  on  either  side,  all  will  be  bound  k 


by  any  agreement  into  which  he  and  they  may  enter,  Bad  bargain 
although  it  may  ultimately  turn  out  that  a  bad  bargain  ™^*  a^lde 
has  been  made.1  beea  uo 

For  example,  in  Knight  v.  Marjoribanks  (e)  certain  fraud, 
persons  were  partners  in  a  speculation  in  Australia.  Knight  v. 
The  speculation  was  not  at  first  successful,  and  it  was  Marjori- 
necessary  for  the  partners  frequently  to  contribute  banks- 
large  sums  of  money  for  the  purpose  of  carrying  it  on. 
The  plaintiff,  who  was  one  of  the  partners,  was  greatly 
pressed  for  money,  and  was  unable  to  contribute  his 
proportion  of  the  required  capital.  A  sum  of  upwards 
of  5000Z.  was  alleged  to  be  due  from  him  to  the  concern ; 
he  never  questioned  the  accuracy  of  this  statement,  but 
assented  to  its  correctness,  and  he  never  examined  or 
sought  to  examine  any  books  or  accounts  ;  and  in  con- 
sideration of  the  sum  so  alleged  to  be  due,  and  of  250?. 
cash,  he  assigned  all  his  interest  in  the  concern  to  his 
co-partners,  and  released  them  from  all  demands.  The 
speculation  afterwards  proving  profitable,  he  sought  to 
set  aside  this  transaction  on  the  ground  of  fraud  and 
inadequacy  of  consideration.  But  as  no  fraud  was 
proved,  as  the  plaintiff  knew  very  well  what  he  was 
about,  as  he  was  content  that  no  accounts  should  be 
taken,  and  that  no  person  should  act  as  his  adviser, 
and  as,  although  he  was  undoubtedly  in  distress,  and 
his  co-partners  knew  it,  yet  they  had  taken  no  unfair  ad- 
vantage of  that  circumstance,  it  was  held  by  both  Lord 
Langdale  and  by  Lord  Cottenham  on  appeal,  that  the 
transaction  was  binding  and  could  not  be  impeached(d). 

Any  arrangement  which,  on  the  principle  here  ad- 
verted to,  is  binding  on  the  partners  themselves,  will 
also,  as  a  general  rule,  be  binding  as  between  the  trus- 
tee in  bankruptcy  or  executors  of  the  retiring  pai'tners 
on  the  one  hand,  and  the  continuing  partners  and  their 
trustees  or  executors  on  the  *  other  (e)  But  as  regards  [  *  486] 
trustees  in  bankruptcy,  it  must  not   not  be   forgotten 

{c)  11  Beav.  322,  and  2  Mac.  &.  G.  10. 

\d)  See,  also.  Ex  parte  Peake,  1  Madd.  346  ;  Ramsbottoni  v. 
Parker,  6  Madd.  5  ;  M'Lure  v.  Ripley,  2  Mac.  &  G.  274  ;  Cockle 
V.  Whiting,  Taml.  55. 

(e)  Ex  parte  Peake,  1  Madd.  346  ;  Ramsbottom  v.  Parker,  6 
Madd.  5  ;  Luckie  v.  Forsyth,  3  Jo.  &  Lat.  3d8. 

1  See  Hunt  v.  Hardwick,  68  Ga.  100  (1881);  Gage  v.  Parnielee, 
87  111.  329  (1877). 


55S 


ACTIONS  BETWEEN  PARTNERS. 


F.k.  III. 
Chap.  10. 
Sect.  5. 


Agreements 
made  on  a 
dissolution 

and  based 
on  false 
accounts. 


Chandler  r. 
Dorsett. 


Spittal  v. 
Smith. 


Arrange- 

[*487] 
ments  with 


that  they  can  set  aside  arrangements  .  entered  into  in 
fraud  of  creditors,  although  such  arrangements  may 
be  binding  as  between  the  parties  to  them  and  their 
respective  executors  (/). 

Notwithstanding  the  inability  of  a  retiring  partner, 
and  of  those  claiming  under  him,  to  avoid  an  agree- 
ment fairly  come  to  between  him  and  his  co-partners, 
the  good  faith  and  open  dealing  which  one  partner  has 
a  right  to  expect  from  another  never  require  to  be  more 
scrupulously  observed  than  when  one  of  them  is  re- 
tiring upon  terms  agreed  to  upon  the  strength  of 
representations  as  to  the  state  of  the  partnership  ac- 
counts ;  and  an  agreement  entered  into  on  a  dissolu- 
tion will  be  set  aside  if  it  can  be  shown  to  have  been 
based  upon  error  or  to  have  been  tainted  by  fraud, 
whether  in  the  shape  of  positive  misrepresentation  or 
of  concealment  of  the  truth.1  Thus,  in  Chandler  v. 
Dorsett  (g),  the  plaintiff  and  the  defendant  dissolved 
partnership  ;  an  account  was  drawn  up  by  the  defend- 
ant, who  made  it  appear  that  there  was  a  balance 
against  the  plaintiff.  The  plaintiff  gave  his  note  for 
the  amount  of  this  balance,  and  afterwards  having  dis- 
covered mistakes  in  the  account,  filed  a  bill  for  a  new 
account.  The  defendant  pleaded  an  account  stated  ; 
but  the  Court  decreed  that  the  defendant  should  come 
to  a  new  account,  and  that  what  should  appear  to  be 
due  on  taking  it  should  be  paid  with  interest.  So,  in 
Spittal  v.  Smith  (h)  where  the  plaintiff  was  entitled 
to  a  share  of  the  produce  of  a  whaling  voyage,  and  the 
defendant  paid  him  a  sum  of  money  as  his  share,  for 
which  the  plaintifi  gave  a  receipt ;  it  was  held  that  as 
there  had  been  concealment  on  the  part  of  the  defend- 
ant, the  plaintiff  was  entitled  to  an  inquiry  as  to  whether 
certain  deductions  which  had  been  made   were  proper. 

As  has  been  more  than  once  observed  in  the  course 
of  the  *  present  treatise,  the  principles  illustrated  by 
the  foregoing  decisions  apply  most  strongly  to  the  case 

(/)  See  Anderson  v.  Maltbv,  2  Yes.  J.  255  :  Biliter  v.  Young, 
6  E.  &  B.  40  ;  Warden  v.  Jones,  2:}  Beav.  497  ;  Heilbut  v.  Ne- 
vill.  L.  R.  4  C.  P.  354,   affirmed  5  C.  P.  478. 

{(/)  Finch,  431.     See,  too,  Maddeford  v.  Austwick,  1  Sim.  89. 

(/()  Taml.  45. 

1  As  to  the  correction  of  errors  arising  from  misrepresentations 
innocently  made,  see  Stephens  v.  Oman.  10  Fla.  9  (1862).  For 
instances  where  relief  has  been  granted  in  settlements  based 
upon  fraudulent  misrepresentations,  see  Case  v.  Cushman.  3 
Watts  &  S.  544  (1842);  Levin  r.  Vannevar.  137  Mass.  532  (1884); 
Holmes  v.  Hubbard,  60  N.  Y.  183  (1875):  McGunu  v.  Hanlin,  29 
Mich.  476  (1874). 


RESCISSION  FOR  FRAUD.  559 

of  a  partner  who  is  expelled  by  the  others.     Powers  of  Bk.  III. 
expulsion  are  always  construed  strictly,  and  unless  they  ^  a,p'_ 
are  exercised  with  perfect  good  faith,  the  expulsion  will 


be  declared  void,  and  the  partner  wrongfully  expelled  an  expelled 
will  be  restored  to  his  position,  and  will  not  be  held  Partner- 
bound  by  accounts  which  may  have  been  signed  by  him 
in  ignorance  of  material  facts  (i).1 

Hitherto   the   arrangement   entered   into,  and  after-  Agreements 
wards  called  in  question,  has  been  supposed  to  have  J?       w 
been    made    between    the   partners   themselves.       But Natives  of  a 
more  difficulty  arises  where  an  arrangement  is  entered  deceased 
into  between  the  representatives  of  a  deceased  partner  partner. 
on  the  one  hand,  and  the  continuing  partners  on  the 
other.     Two  cases  have  here  to  be  considered,  accord- 
ing as  the  representative  of  the  deceased  is  or  is  not 
himself  a  partner  in  the  firm. 

If  an  executor  of  a  deceased  partner  is  not  a  member  1.  Where  the 
of  the  firm,  it  is  competent  for  him  and  the  surviving  representa- 
partners  to  agree  that  the  share  of  the  deceased  shall  *lve  1S  not 
be  ascertained  in  a  particular  way,  or  to  be  taken  at  a  partner- 
certain  value.2     And  although  it  has  been  said  that  the 
creditors,  or  other  persons  interested  in  the  estate  of 
the  deceased,  may  impeach  such  an  agreement  by  in- 
stituting proceedings   against  the  surviving    partners 
and  the  executors  of  the  deceased  (k),  still  agreements 
of    the    kind  in  question  cannot  be    successfully    im- 
peached, unless  there  has  been  some  fraud  or  collusion 
between  them  and  the  executors.     In  Davies  v.  Davies  (I) 
Lord  Langdale  observed  : — 

"It  has  been  said  in  the  course  of  the  argument,  that  in  a  suit  Davies  v. 
constituted  as  this  is  against  the  execntor  and  surviving  partner  Davies. 

(i)  See  Blisset  v.  Daniel,  10  Ha.  538  ;  as  to  damages  see  Wood 
v.  Woad,  L.  R.  9  Ex.  190.  See,  also,  Russel  v.  Russell,  14  Ch. 
D.  471. 

(fc)  See  Bowsher  v.  Watkins,  1  R.  &  M.  277  ;  Gedge  v.  Traill, 
ib.  281. 

(0  2  Keen,  539. 

1  If  reinstatement  is  an  inadequate  relief  under  the  circum- 
stances, the  court  will  decree  the  dissolution  of  the  firm  and  an 
accounting.     Patterson  v.  Silliman,  28  Pa.  St.  304  (1857). 

2  Where  the  articles  of  partnership  give  the  survivor  the  right 
to  take  at  a  valuation  or  that  the  assets  shall  vest  in  him,  a  set- 
tlement made  in  good  faith  by  the  executor  of  the  estate  of  a 
deceased  partner  will  bind  the  distributees,  Holmes'  Appeal,  79 
Pa.  St.  279  (1875).  And  even  in  the  absence  of  this  provision 
such  a  step  by  the  executor  will  be  approved  by  the  court  and 
will  bind  all  interested  in  the  estate.  Grim's  Appeal.  105  Pa. 
St.  375  (1884);  Ludlum  v.  Buckingham,  35  N.  J.  Eq.  71  (1882); 
Heath  v.  Waters,  40  Mich.  457  (1879);  Kimball  v.  Lincoln,  99 
111.  578  (1881);  Sage  u.  Woodin  6G  N.  Y.  578  (1876). 


5G0 


ACTIONS  BETWEEN  PARTNERS. 


Bk.  III. 
Chap.  10. 
Sect.  5. 


[  *  488] 


Effect  of 
fraud  and 
collusion. 


of  the  testator,  for  an  account  of  the  partnership  transactions,  it 
was  not  necessary  to  prove  the  fraud  and  collusion  which  are 
charged  in  the  bill,  and  the  case  of  Bowsher  v.  Watkins  was  cited 
in  support  of  that  proposition.  I  well  recollect  that  there  were 
special  circumstances  which  induced  Sir  John  Leach  to  come  to 
the  conclusion  he  did  in  that  case,  and  that  the  decision  was  far 
from  establishing  the  general  proposition  that  in  every  case  a  bill 
might  be  *  filed  against  an  executorand  surviving  partner  of  the 
testator  without  charging  'and  proving  fraud  or  collusion.  In 
this  case  there  are  no  special  circumstances.  It  is  a  bill  filed  by 
persons  beneficially  interested  in  the  testator's  estate  against  the 
executor  and  the  surviving  partner,  and  it  seeks  to  have  the 
partnership  accounts  now.  The  defendant,  the  surviving  part- 
ner, by  his  plea  avers  that  an  account  was  settled  with  the  ex- 
ecutor on  the  31st  of  December,  1832,  and  that,  if  unimpeached, 
is  a  sufficient  defence  to  the  bill. ' ' 

Later  cases  are  in  conformity  with  this  decision  (m). 
If  there  has  been  fraud  or  collusion  between  the  sur- 
viving partners  and  the  executors  of  the  deceased  part- 
ner, the  case  naturally  assumes  a  different  aspect,  and 
any  arrangement  between  them  will  be  liable  to  be  set 
aside  at  the  instance  of  the  persons  interested  in  the 
estate  of  the  deceased  (n).  And,  even  although  there 
be  no  fraud  or  collusion,  still,  if  the  executor  has  ob- 
tained less  than  the  true  value  of  the  deceased's  share 
in  the  partnership  estate,  the  executor  may  be  liable  as 
for  a  devastavit,  although  the  surviving  partner  may  be 
protected  against  all  demands.  But  if,  in  a  case  of 
difficulty,  the  executor  has  acted  with  a  bond  fide  view 
to  do  his  best  for  the  estate  he  represents,  the  Court 
will  not  be  willing  to  make  him  account  for  what,  with- 
out his  wilful  default,  he  might  have  received  from  the 
surviving  partners  (o). 
•2  Where  the  -^  a  partner  dies  and  leaves  his  co-partner  his  execu- 
representa-  tor,  much  greater  difficulty  is  met  with  than  in  the 
case  last  supposed.  By  the  present  hypothesis  the 
executor  is  invested  with  two  characters,  and  his  interest 
as  surviving  partner  is  often  in  conflict  with  his  duty 

(m)  Chambers  v.  Howell,  11  Beav.  6  ;  Stainton  v.  The  Carron 
Co.,  18  Beav.  146  ;  and  as  to  accounts  settled  by  one  of  several 
executors,  Smith  v.  Everett,  27  Beav.  446. 

(n)  As  in  Cook  v.  Collingridge,  Jac.  607  ;  Rice  v.  Gordon,  11 
Beav.  265.  See  also  Beningfield  v.  Baxter,  12  App.  Ca.  167. 
Less  than  fraud  or  collusion  will  justify  an  action  against  an 
executor  of  a  deceased  partner  and  the  surviving  partners,  Travis 
v.  Milne,  9  Ha.  141,  but  will  not,  it  is  apprehended,  invalidate 
arrangements  into  which  they  may  have  entered  for  payment  of 
the  share  of  the  deceased. 

(o)  See  Kowley  v.  Adams,  7  Beav.  395,  and  2  H.  L.  C.  725. 


tives  is  him 
self  a  part- 
ner. 


RESCISSION  FOR  FRAUD.  561 

as  representative  of  the  deceased.     This  conflict  of  duty  Bk.  III. 
and  of  interest  renders  it  almost  impossible  for  the  ex-  SJSP'k 

ecutor  to  enter  into  any  arrangement  with  respect  to '. ! 

the  share  of  the  deceased  in  the  partnership  estate  which 

*  those  interested  in  that  share  may  not  afterwards  sue-  [  *  489] 

ceed  in  setting  aside  (p).1 

In  Wedderbum  v.  Wedderbum  (q),a  leading  case  on  "Wedderburn 
this  subject,  an  account  of  a  deceased  partner's  estate  *■  "Wedder- 
was  directed  after  a  lapse  of  thirty  years,  and  repeated 
changes  in  the  firm,  and  after  several  deeds  and  a  re- 
lease had  been  executed  by  the  parties  beneficially  in- 
terested.    The  surviving  partners  were  the  executors  of 
the  deceased,  and  were  guardians  of  the  persons  bene- 
ficially entitled  to  his  share,  and  the  settlements  and 
releases  were  executed  in  ignorance  of  the  true  state  of 
the  partnership  accounts.     So  in  Millar  v.   Craig  (r),  Millars, 
where  one  partner  died,  leaving  four  executors,  of  whom    raig- 
two  were  members  of  the  firm;  an  account  was  settled 
between  the  executors  and  the  residuary  legatees,  and 
releases  were  executed;  but  errors  having  been  proved 
in  the  accounts,  the  releases  were  set  aside,  and  the  ac- 
counts were  re-opened.     Again,  in  Stocken  v.  Darvson  (s),  Stocken  v. 
a  partner  by  his  will  authorised  a  sale  of  his  share  to  Dawson- 
his  co-partner,  whom  he  appointed  one  of  his  executors. 
The  surviving  partner  purchased  the  share  of  the  de- 
ceased at  a  valuation,  but  the  purchase  was  set  aside  at 
the  suit  of  the  son  of  the  deceased,  after  a  lapse  of  seven 
years.      So  in  Rice  v.  Gordon  (t),  where  a  partner  died,  ?ieV'' 
some  of  his  co-partners  obtained  administration  to  his 
estate  and  sold  part  of  the  assets  of  the  deceased  to  an- 
other of  the  partners,  but  at  an  undervalue;  the  sale  was 
set  aside  at  the  suit  of  a  creditor. 

In  all  these  cases  there  was  some  ground  for  setting  Difficult 
aside  the  arrangement  made  by  the  executors,  in  addi-  position  of 
representa- 

(p)  See  Cook  v.  Collingridge,  Jac.  607.  tive. 

\q)  2  Keen,  722,  and  4  M.  &  Cr.  41. 

(r)  6  Bear.  433;  in  This  ease  no  question  was  raised  as  against 
the  partners  who  were  not  executors. 

(s)  9  Beav.  239. 

(0  11  Beav.  265. 

1  Such  a  transaction  has  been  said  to  lie  fraudulent  per  se  and 
not  to  be  sustained  when  objected  to  bv  any  party  in  interest. 
Colgate  (-Colgate,  23  N.  J.  Eq.  372  (1872).  See  dictum  in  Gil- 
bert's Appeal,  78  Pa.  St.  266  (1875).  In  Filler  v.  Phelps,  18 
Conn.  294  I  1847),  it  was  held  that  where  an  administrator  who 
was  a  co-partner  with  the  decedent  bought  out  the  latter's  in- 
terest in  the  firm,  he  could  be  compelled  to  carry  out  his  contract, 
although  illegal.  And  in  .Moses/.  Muses.  50  Ga.  9  (1873),  it  was 
decided  that  an  executor  can  buy  from  the  surviving  partner  an 
interest  for  himself  in  the  firm. 

*  13   LAW   OF   PARTNERSHIP. 


562  ACTIONS  BETWEEN  PARTNERS. 


Bk.  III.  tion  to  the  mere  fact  that  they  were  also  surviving  part- 

Chap.  JO.  ners.  But,  as  observed  by  Lord  Eldon  in  Cook  v.  Col- 
__L_I__  lingridge  (u),  "one  of  the  most  firmly  est ablished rules 
is,  that  persons  dealing  as  trustees  and  executors  must 
put  their  own  interest  entirely  out  of  the  question,  and 
this  is  so  difficult  to  do  in  a  transaction  in  which  they 
are  dealing  with  themselves  that  the  Court  will  not 
[  *490]        *  inquire  whether  it  has  been  done  or  not,  but  at  once 

says  such  a  transaction  cannot  stand"  (x). 
Eight  of  re-        However,  a  surviving  partner  who  is  the  executor  of 
tainer  out  of  bis  deceased  co-partner,  may  retain  out  of  his  assets 
what  is  due  from  the  deceased  to  himself  on  taking  the 
partnership  accounts  (y). 
Loss  of  right       Assuming  that,  on  the  principles  above  explained,   a 
to  rescind.       person  has  a  right  to  rescind  a  contract  on  the  ground 
of  misrepresentation,  he  may  lose  that  right  in  one  of 
two  ways,  viz.,   1,  by  his  own  laches;  and  2,  by  disa- 
bling himself  from  restoring  what  he  may  himself  have 
received. 

A  person  entitled  to  rescind  a  contract  for  fraud  loses 
his  right  if  he  does  not  repudiate  the  contract  within  a 
reasonable  time  after  the  discovery  of  the  fraud  (z),1 
and,  a  fortiori,  if  after  such  discovery  he  does  any- 
thing to  affirm  the  contract,2  or  anything  which  is  in- 
consistent with  his  right  to  rescind  it;  e.  g  ,  if,  in  the 
case  of  shares  fraudulently  sold  to  him,  he  attempts 
to  resell  them  (a),  or  continues  to  act  as  a  share- 
holder (6). 
Rescission  in  Further,  a  person  induced  by  fraud  to  enter  into  a 
toio-  contract  cannot  rescind  it  unless  he  is  himself  able  to 

rescind  it  in  toto,  and  to  restore  the  other  party  to  his 
former  position,  or  unless  his  inability  so  to  do  is  at- 
tributable  to  that  party  (c).      But   if  the   contract  is 

(u)  Jac.  621. 

(x)  The  position  of  the  executors  of  the  deceased  partner  will 
be  examined  at  length  hereafter,  and  the  subject  above  noticed 
will  he  again  adverted  to  on  that  occasion. 

(y)  Morris  v.  Morris,  10  Ch.  68,  where  the  accounts  were  still 
unsettled. 

(z)  See,  on  this  suhject  generally.  Clough  r.  L.  &N.W.  Rail.  Co., 
L.  R.  7  Ex.  35,  and  as  instances  of  repudiation  heing  too  late  see 
Denton  r.  Macneil,  2  Eq.  352;  Ashley's  case,  9  Eq.  263;  Scholey 
v.  Central  Rail.  Co.  of  Venezuela,  ib.  266,  note.  Compare 
Macniel's  case,  10  Eq.  503;  Campbell  v.  Flemings,  1  A.  &  E.  40. 

(a)  ISi'iggs'  case,  1  Eq.  483. 

(i)  Sharpley  v.  Louth  and  East  Coast  Rail.  Co.,  2  Ch.  D.  663. 

('I  See  Urquhart  v.  McPherson,  3  App.  Ca.  831,  a  deed  of  dis- 

1  Richards  v.  Todd.  127  Mass.  167  (1879);  Evans  v.  Montgom- 
ery. 50  Iowa,  325  (1879). 

-  St.  John  c.  Heudrickson,  81  Ind.  350  (1882). 


ACCOUNT.  563 

severable,  inability  to  rescind  it  as  to  part  is  not  fatal  to  Bk.  III. 
the  right  to  rescind  it  as  to  another  part  (d).  Sect  6 

It  must  be  remembered  that  a  contract  induced  bv 


fraud  is  voidable  only  and  not  void.     Consequently  a  Liability  to 
person   induced   by  fraud  to  become  a  partner  is  liable  cre<llte,rs- 
to  all  creditors  of  the  *  firm  in  respect  of  its  dealings  [491] 
with  them  whilst  he  is  a  partner  (e).1 


Section  VI. — Actions  for  Dissolution,  Account,  Etc 

The  remedy  for  a  partner  who  insists  on  a  dissolution 
which  is  opposed  by  his  co-partners  was  formerly  by  a 
suit  in  equity,  and  is  now  by  an  action  which  should  be 
brought  in  the  Chancery  Division  of  the  High  Court  (/). 
Actions  involving  the  taking  of  partnership  accounts 
should  also  be  brought  in  the  same  division. 

In  an  action  for  dissolution  the  statement  of  claim 
should  claim  a  dissolution  and  an  account,  and  also  an 
injunction  and  a  receiver  to  restrain  the  defendants  from 
dealing  with  the  partnership  assets  and  from  issuing  bills 
or  notes  in  the  name  of  the  firm.  Such  an  action  lies, 
although  the  partuership  be  a  partnership  at  will  and 
can  therefore  be  dissolved  by  the  plaintiff  himself  (g); 
but  if  the  partnership  has  been  dissolved  before  action, 
the  plaintiff  should  claim  a  declaration  to  that  effect  (h). 
If  the  partnership  is  admitted  and  the  right  to  dissolve 
is  not  contested,  the  Court  will  decree  a  dissolution  on 
motion  before  the  hearing  or  trial  (i).  An  action  may 
be  brought  for  rescission  of  the  contract  of  partnership 
or  in  the  alternative  for  dissolution  of  the  partner- 
ship (j). 

solution  and  release.  See,  also,  Phosphate  Sewage  Co.  v.  Hart- 
mont,  5  Ch.  D.  394;  Laing  v.  Campbell,  36  Beav.  3;  Clarke  v. 
Dickson,  E.  B.  &E.  148;  Maturing  Tredinnick,  2  N.  R.  514,  and 
4  ib.  15. 

(d)  See  last  note. 

(e)  See  Ex  parte  Broome,  1  Rose,  69;  Jeffreys  v.  Smith,  3  Russ. 
158;  Macbride  v.  Lindsay,  9  Ha.  574;  and  as  to  shareholders  in 
companies,  Reese  River  Mining  Co.  v.  Smith,  L.  R.  4  Ho.  Lo.  70; 
Henderson  v.  The  Roval  British  Bank,  7  E.  &  B.  356;  Daniell  v. 
The  Royal  British  Bank,  1  H.  &  N.  681 ;  Powis  v.  Harding.  1  C. 
B.  N.  S.  533;    Howard  v.  Shaw,  9  Ir.  Law  Rep.  335. 

(/)  Jud.  Act,  1873,  I  34. 

\g\  Master  r.  Kirton,  3  Ves.  74. 

(h)  The  date  of  the  dissolution  depends  on  circumstances.  See 
infra,  book  iv.  ch.  1. 

(i)  Thorp  v.  Holdsworth,  3  Ch.  D.  637,  where  the  terms  of  the 
partnership  were  in  dispute. 

(j)  Bagot  v.  Eastern,  7  Ch.  D.  1. 

1  Haynes  v.  Stewart,  10  B.  Mon.  429  (1850). 


161  ACTIONS  BETWEEN  PARTNERS. 


Bk.  III.  An  action  for  the  dissolution  of  an  ordinary  partner- 

Chap.  10.        skjp  may  ]je   maintained,  although  the   partnership  is 
beet"  6"  one  which  may  be  wound  up  under  the  statutory  juris- 

diction conferred  by  the  Companies  act,  1SG2   (k);  but 
practically  it  is  more  convenient/to  have  recourse  to  that 
act  where  it  applies. 
[  *  492]  The  grounds  on  which  the  Court  will  dissolve  a  *  part- 

nership (/);  and  the  mode  of  winding  up  the  affairs  of 
a  partnership  in  the  event  of  death  or  bankruptcy  will 
be  examined  in  Book  IV. :  in  the  present  place  it  is  pro- 
posed to  deal  with  the  subjects  of  Account  and  Discov- 
ery, Injunctions,  Receivers,  Sale  of  Partnership  Prop- 
erty. 

1.   Of  account  and  discovery. 

Under  this  head  it  is  proposed  to  consider,  with  ref- 
erence to  partners  and  persons  claiming  under  them — 

1.  The  right  to  an  account  and  discovery  generally. 

2.  The  defences  to  an  action  for  an  account  and  dis- 
covery. 

3.  The  judgment  for  a  partnership  account. 

(a)  Of  the  right  to  an  account  and  discovery  generally,  as  between 
partners  and  those  claiming  under  them. 

1.  Action  for  1-  As  to  Account. — The  right  of  every  partner  to  have 
an  account,  an  account  from  his  co-partners  of  their  dealings  and 
transactions,  is  too  obvious  to  require  comment.  An 
action  for  an  account  may  be  maintained  by  partners 
although  the  partnership  accounts  are  not  compli- 
cated (ra);  and  although  an  action  for  damages  may  be 
sustainable  (w);1  and  although  the  defendant  may  have 
stolen  or  embezzled  the  money  of  the  firm  (o).  More- 
over, although  formerly  the  Court  of  Chancery  would 

(k)  Jones  v.  Charlemont.  16  Sim.  271;  Clements  v.  Bowes,  17 
ib.  167. 

(/)  As  to  fraud,  see  ante,  p.  479  et  seq, 

(m)  Cruikshank  v.  M'Vicar,  8  Beav.  106.  See  Frietas  t?.  Dos 
Santos,  1  Y.  &  J.  574. 

(n)  Wright  v.  Hunter,  5  Ves.  792,  where  the  bill  was  for  con- 
tribution; Blain  v.  Agar,  1  Sim.  37,  and  2  ib.  289,  where  the  bill 
was  for  the  recovery  back  of  deposits.  See,  too,  Townsend  v. 
Ash,  3  Atk.  336,  as  to  the  profits  of  partnership  real  estate. 

(o)  Eoope  v.  D'Avigdor,  10  Q.  B.  D.  412. 

1  Where  a  surviving  partner  admits  that  the  account  stated  by 
the  administrator  of  the  deceased  partner  is  correct,  although  this 
gives  the  latter  a  remedy  at  law,  it  has  been  held  not  to  oust  the 
jurisdiction  of  a  court  of  equity.  Personette  v.  Pryme.  34  N.  J. 
Eq.  26  (1881). 


account.  565 

not  entertain  a  suit  for  damages  merely,   although  the  Bk.  III. 
suit  was  in  form  a  suit   for   an  account    (p);  yet  in  a  g^p'6 

partnership  suit  involving  a  general  account  claims  were . — '. 

adjusted  which  in  ordinary  cases  would  have  formed 
the  subject  of  an  action  at  law  (q);1  and  it  is  appre- 
hended that*  now  the  Court  will  in  taking  such  an  ac- 
count deal  with  every  claim  which  it  may  be  *  necessary  [  *  493  ] 
to  investigate  in  order  to  adjust  and  finally  settle  the 
account.  But  disputes  not  affecting  the  account  will 
naturally  be  excluded  from  it. 

An  account  may  be  had  by  one  partner  "  or  his   exe-  Persons  en- 
cutors  or  administrators  (r)3  against  his  co- partner   or  titled  to  an 
his  executors  or  administrators  (s).4      So  by  the  trus-  account, 
tees  of  a  bankrupt    partner  against   the  solvent  part- 
ner (t)  or  his  executors  (u).     So  a  solvent  partner  may 
maintain   an  action  for  an  account  against  the  trustees 
of  his  bankrupt  co-partner  ;5  and,  notwithstanding  the 
rule  against  making  mere  witnesses  parties,  the  bank- 
rupt himself  may,  it  is  said,  be  made  a  defendant   for 
the  purposes  of  discovery  (v).6      Again,  if  a  partner's 

(p)  Duncan  v.  Luntley,  2  Mac.  &  G.  30,  -where  shares  had  been 
wrongfully  sold  by  the  secretary  of  a  company.  See,  also,  Clif- 
ford v.  Brooke,  13  Ves.  132. 

(q)  See  Bury  v.  Allen,  1  Coll.  589;  MacKennar.  Parkes,fmte,  p.  67, 
note  (o).     Compare  Great  Western  Ins.  Co.  v.  Cunliffe.  9  Ch.  525. 

(r)  Heyne  v.  Middlemore,  1  Rep.  in  Ch.  138  ;  Hackwell  v. 
Eustman,  Cro.  Jac.  410. 

(s)  Beaumont  v.  Grover,  1  Eq.  Ab.  8.  pi.  7. 

(t)  As  in  Wilson  v.  Greenwood,  1  Swanst.  471. 

(«)  As  in  Addis  v.  Knight,  2  Mer.  119. 

(<)  Whitworth  v.  Davis,  1  V.  &  B.  545.  SeeMitford PI.  187  ed.  5. 

1  Richards  v.  Todd,  127  Mass.  167  (1879);  Morrison  v.  Kramer, 
58  Iud.  38  (1877);  Singer  v.  Heller,  40  Wis.  544  (1876);  Xichol 
v.  Stewart,  36  Ark.  612  (1880). 

2  Sharp  v.  Hibbins,  42  N.  J.  Eq.  543  (1887),  accords  the  right 
to  an  account  to  a  partner  indebted  to  his  firm  and  to  whom  no 
balance  could  come,  on  the  ground  that  he  has  a  right  to  have 
the  firm's  assets  applied  to  the  payment  of  its  debts  and  to  know 
what  his  own  ultimate  indebtedness  will  amount  to.  A  dor- 
mant partner  can  claim  an  accounting,  Harvey  v.  Yarney,  98 
Mass.  118  (1867).  But  if  a  retiring  partner  parts  in  any  manner 
with  his  equitable  lien  on  the  firm's  assets,  his  right  to  an  ac- 
count is  gone.     Wilson  v.  Soper,  13  B.  Mon.  411  (1853). 

3  Grim's  Appeal,  105  Pa.  St.  375  (1884);  Freeman  a.  Freeman, 
136  Mass.  260  (1884);  Tillinghast  r.  Champlin,  4  R.  I.  173. 

4  The  representatives  of  a  deceased  partner  must  be  made 
parties  to  a  bill  pravingan  account.  Jenness  r.  Smith,  58  Mich. 
280  (1885);  Burchard  v.  Bovce,  21  Ga.  6  (1857). 

5  Fuller  v.  Benjamin,  23  Me.  255  (1843). 

0  Although  a  partner  assign  his  share,  he  is  a  necessary  party 
to  a  bill  for  an  account.  Raiguel's  Appeal.  80  Pa.  St.  234  1878); 
Bank  v.  Railroad  Co.  11  Wall.  624  (1870).  Settembre  v.  Put- 
man,  30Cal.  490  (1866). 


506 


ACTIONS  BETWEEN  PARTNERS. 


Bk.  III. 
(hup.  10. 
Sect.  6. 

Servants,  &c. 


Sub-part- 
ners, &c. 


[  *  494] 


Creditors, 
&c.,  of 
deceased 
partner. 


share  is  taken  in  execution,  the  purchaser  from  the 
sheriff  is  entitled  to  an  account  from  the  solvent  part- 
ners, as  is,  also,  the  execution  debtor  himself  (x).1 

An  agreement  to  pay  out  of  profits  confers  a  right  to 
an  account  ;  and  servants  entitled  to  a  share  of  profits 
can  maintain  an  action  for  an  account  of  them  (y).2 

A  sub  partner  has  no  right  to  an  account  from  the 
principal  firm,  or  any  of  the  members  of  it,  except  the 
one  with  whom  he  is  a  sub- partner  ;  for  there  is  no 
contract  or  privity  save  between  those  two  (z).3  It  has 
even  been  said  that  if  a  partner  charges  or  mortgages 
his  share  in  favour  of  a  creditor,  the  latter  has  no  right 
to  an  account  from  the  other  partners  of  the  profits  to 
which  their  co- partner  may  be  entitled.  This,  how- 
ever, is  not  correct  (a)4  and  as  regards  partners  in 
mines,  it  has  been  decided  that  a  mortgagee  of  one 
partner  is  entitled  to  an  account  against  the  other 
partners  (b).  If  a  partner,  with  *  the  consent  of  his 
co- partners,  assigns  bis  share  in  the  partnership,  the 
assignees  will,  by  virtue  of  this  assent,  acquire  the  right 
of  the  assignor,  and  be,  therefore,  entitled  to  an  account 
from  the  other  partners  (c).5 

If  a  partner  dies,  a  question  arises  as  to  the  right  of 
his  creditors  and  legatees  to  sue  the  other  partners  for 
an  account  of  the  share  of  the  deceased.  The  credit- 
ors of  the  late  firm  can  maintain  an  action  against  the 
executors  of  the  deceased  and  the  surviving  partners,  in 
order  to  obtain  payment  of  their  debt  out  of  the  assets 


(.r)  See  Habershan  v.  Blurton,  1  De  G.  &  Sm.  121  ;  Perens  v. 
Johnson,  3  Sm.  &  G.  419. 

(y)  See  Harrington  v.  Churchward,  6  Jur.  N.  S.  576  ;  Rishton 
v.  Grissell,  5  Eq.  326  ;  Turney  v.  Bay  ley,  4  De  G.  J.  &  Sm.  332. 

(z)  Brown  v.  De  Tastet,  Jac.  284  ;  Raymond's  case,  cited  in 
Ex  parte  Barrow,  2  Rose,  252  ;  Bray  v.  Fromont,  6  Madd.  5,  and 
see  Killock  v.  Greg,  4  Russ.  285,  as  to  agents. 

(«)  See  Wbetbam  v.  Davev.  30  Ch.  D.  574,  and  ante,  p.  364. 

(b)  Bentley  v.  Bates,  4  Y.  &  C.  Ex.  182. 

(c)  See  Fawcett  v.  Whitebouse,  1  R.  &  M.  132  ;  Redmayne  v. 
Forster,  2  Eq.  467. 


1  Knerr  v.  Hoffman.  65  Pa.  St.  126  (1870);  Clement  v.  Foster, 
3Ired.  Eq.  213   (1844);  Nixon  v.  Nash,     12  Oh.   St.  647  1861). 

2Hargrave  v.  Conrov,  19  N.  J.  Eq.  281  (1868);  Channon  v. 
Stewart,"  103  111.  541  "(1882);  Osbrey  v.  Reimer,  51  N.  Y.  630 
(1872);  Hallett  r.  Cumston,  110  Mass.  29  (1868). 

3  Reilly  v.  Reilly,  14  Mo.  App.  62  (1883). 

4  Wallace's  Appeal,  104  Pa.  St.  559  (1883);  Receivers  v.  God- 
win,  5N.  J.  Eq.  334  (1846);  Huston  v.  Neil,  41  Ind.  504  (1873). 

5  SeeGyger's  Appeal,  62  Pa.  St.  73  (1869);  Bank  v.  Railroad 
Co.,  11  Wall.  624  (1870);  Farley  v.  Moog,  79  Ala.  148  (1885). 


ACCOUNT.  567 

of  the  deceased  (d).     But  the  separate  creditors,  or  the  Bk.  III. 
legatees,  or  next  of    kin  of  a  deceased  partner,  stand  ^  j?"ft 

in  a  very  different  position.     In  the  absence  of  special         '       „ 

circumstances,  they  have  no  locus  standi  against  the 
surviving  partners,  but  only  against  the  legal  personal 
representative  of  the  deceased  partner  (e),1  and  it  is 
only  when  there  is  collusion  between  these  persons,  or 
when  circumstances  have  occurred  which  preclude  the 
representative  from  himself  obtaining  an  account  of  the 
share  of  the  deceased,  that  his  separate  creditors,  lega- 
tees, or  next  of  kin,  may  themselves  bring  an  action  for 
that  purpose  against  the  surviving  partners  (f).2 

The  account  which  a  partner  may  seek  to  have  taken,  General  or 
may  be  either  a  general  account  of  the  dealings    and  limited 
transactions  of  the  firm,  with  a  view  to  a   winding  up  accour>k 
of  the  partnership  ;  or  a  more  limited  account,  direct- 
ed to  some  particular  transaction  as  to  which  a  dispute 
has  risen. 

It  was  formerly  considered  that  no  account  between  Account 
partners  could  be  taken  in  equity,  save  with  a  view  to  without  a 
a  dissolution  (g),  and  a   bill   praying  an  account  but  dissolution, 
not  a  dissohxtion  has  been  held  bad  on  demurrer   (h). 
But  this  rule  has  been  gradually  relaxed  ;  for  it  has 
been  felt  that  more  injustice  frequently  arose  from  the 
refusal  of  the  Court  to  do  less  than  complete  *  justice,  [  *  495] 
than  could  have  arisen  from  interfering   to  no  greater 
extent  than  was  desired  by  the   suitor  aggrieved  (i).3 
Accordingly,  in  Prole   v.    Master  man   (k),  where  the  Prole  v.  Mas- 
promoter  of  a  company  sought  to  make  his  co-promot-  terinau. 
ers  contribute  to  a  debt  paid  by   him,  but  for  which 

(d)  Wilkinson  v.  Henderson,  1  M.  &  K.  582,  and  see  book  iv. 
ch.  3.  I  3. 

(e)  Davies  v.  Davies,  2  Keen,  534  ;  Travis  v.  Milne,  9  Ha.  141; 
Langley  v.  The  Earl  of  Oxford,  2  Amb.  798,  Blunt's  ed. ;  Seeley 
v.  Boehrn,  2  Madd.  180. 

(f)  See  the  caseslast  cited.  This  subject  will  be  again  alluded  to. 

(g)  Fornian  v.  Homfray,  2  V.  &  B.  329  ;  Knebell  v.  White,  2 
Y.  &  C.  Ex.  15  ;  ante,  p.  464  ct  scq. 

(h)  Loscorabe  v.  Russell,  4  Sim.  8. 

(i)  See  ante,  #3  (1)  of  this  chap. 

(k)  21  Beav.  61.  Compare  Munningsw.  Bury,  Tam.  147.  The 
circumstance  that  an  action  for  contribution  would  lie,  did  not 
oust  the  jurisdiction  of  a  court  of  equity,  Wright  v.  Hunter,  5 
Ves.  792. 


1  Rosenzweig  v.  Thompson,  G6  Md.  593  (1881);  Harrison  v. 
Righter,  11  N.  J.  Eq.  389  (1855). 

2  Boyle  v.  Boyle,  4  B.  Mon.  570  (1844),  Stewart  v.  Burkhalter, 
28  Miss.  37(!  (1855).  So  if  the  executor  happens  also  to  be  the 
surviving  partner  and  he  mismanage  or  misappropriates  assets, 
Harrisou  v.  Righter,  11  N.  J.  Eq.  389  (1855). 

3  Pirtle  v.  Peun,  3  Dana,  247  (1835). 


>68 


ACTIONS  BETWEEN  PARTNERS. 


P.k.  III. ' 
Chap.  10. 
Sect.  6. 


Cases  in 
which  an 
account  will 
be  decreed, 
although  no 
dissolution  is 
prayed. 


1.  Account 

[  *  496] 

where  one 
partner 
withhold 
what  the 
firm  is  en- 
titled to. 


they  were  liable  as  well  as  he,  it.  was  held  that  a  decree 
might  be  made  without  directing  a  general  account  of 
what  was  due  from  the  plaintiff  in  respect  of  other 
matters.  Again,  in  the  case  of  a  mutual  insurance  so- 
ciety, where  the  funds  of  the  society  are  answerable 
for  the  payment  of  the  monies  due  upon  their  policies, 
an  assured  member  is  entitled  to  an  account  of  what  is 
due  to  him  upon  his  policy,  and  to  a  decree  for  the  pay- 
ment of  what  is  so  due,  without  involving  himself  in 
any  general  account  of  the  dealings  and  transactions  of 
the  society,  or  seeking  for  a  dissolution  thereof  (Z). 

The  old  rule,  therefore,  that  a  decree  for  an  account 
between  partners  will  not  be  made  save  with  a  view  to 
the  final  determination  of  all  questions  and  cross  claims 
between  them,  and  to  a  dissolution  of  the  partnership, 
must  be  regarded  as  considerably  relaxed,  although  it 
is  still  applicable  where  there  is  no  sufficient  reason  for 
departing  from  it. 

There  are  three  classes  of  cases  in  which  actions  for 
an  account,  without  a  dissolution,  are  more  particularly 
common,  and  to  which  it  is  necessary  specially  to  refer. 
These  are — 

1.  Where  one  partner  has  sought  to  withhold  from 
his  co-partner  the  profit  arising  from  some  secret  trans- 
action. 

2.  Where  the  partnership  is  for  a  term  of  years  still 
unexpired,  and  one  partner  has  sought  to  exclude  or 
expel  his  co-partner  or  to  drive  him  to  a  dissolution. 

3.  Where  the  partnership  has  proved  a  failure,  and 
the  partners  are  too  numerous  to  be  made  parties  to 
the  action,  and  a  limited  account  will  result  in  justice 
to  them  all. 

1.  Where  one  partner  has  obtained  a  secret  benefit, 
from  *  which  he  seeks  to  exclude  his  co-partners,  but 
to  which  they  are  entitled,  they  can  obtain  their  share 
of  such  benefit  by  an  action  for  an  account,  and  such 
action  is  sustainable,  although  no  dissolution  is  sought. 
The  cases  illustrating  this  doctrine  have  been  already 
noticed  at  length  (m),  and  it  will  therefore  be  sufficient 
here  to  state  that  an  account  was  directed,  although 
the  plaintiff  did  not  seek  to  have  the  partnership  dis- 
solved, or  its  affairs  wound  up,  in 

Hichens  v.  Congreve,  1  E.  &  M.  150. 

Fawcettw.  Whitehonse,  1  R.  &  M.  132,  ante,  p.  313. 

(1)  See  Bromley  v.  Williams,  32  Beav.  177  ;  Hutchinson  v. 
Wright,  25  Beav.  444  ;  Taylor  v.  Dean,  22  Beav.  429.  See,  too, 
Bobson  v.  McCreight,  25  Beav.  272. 

(m)  Ante,  p.  305  ct  seg. 


account.  569 

Beck  v.  Kantorowicz.  3  K.  &  J.  230.  Bk.  III. 

The  Society  of  Practical  Knowledge  ».  Abbott,  2  Bear.  559.  Chap.  10. 

Sect.  6. 

In  all  the  other  cases  of   this  class,  except   Clegg  v. 

Fishwick  (n),  in  which  a  dissolution  was  prayed,  the 
report  is  silent  as  to  whether  a  general  winding  up  was 
sought  or  not. 

With  reference  to  cases   of  this   description,  it   may  The  equity 
be  observed  that  where  the  benefit  which  the  plaintiffs  of  the  firm  is 
assert  their  right  to  share  has  not  yet  been  obtained,  against  the 
but  only  agreed  for  by  their  co-partners,  the   plaintiffs  p^ner  only. 
have  no  locus  standi  against  the  person  with  whom  the 
agreement  has  been  entered  into  by  those  partners,  and 
cannot  therefore  restrain  such  person  from  performing 
that  agreement.     The  proper  course  for  the  aggrieved 
partners  to  take  is  to  proceed  against  their  co-partners, 
and  claim  from  them  the  benefit  of  the  agreement  into 
which  they  have  entered  (o). 

2.   "Where  the  partnership  is  for  a  term  of  years  still  2.  Account 
unexpired,and  one  partner  has  sought  to  exclude  or  ex-  m  cases  of 
pel  his  co-partner,  or  to  drive  him  to  a  dissolution.    In  ^c  usl0n' 
cases  of  this  description  an  account  has  beeu  directed, 
although  no  dissolution  has  been  asked. 

The  general  proposition  that  courts  of  equity  would 
interfere  under  the  circumstances  now  supposed,  was 
laid  down  by  Sir  John  Leach  in   Harrison  v.  Armit- 
age  (p),  where,  however,  no  *  account  was  directed,  in-  [  *  497] 
asmuch  as  the  evidence  did  not  establish  a  partnership. 
But  in  Chappie  v.  Cadell  (q)  an  account  was  directed  Chappie  v. 
at  the  suit  of  a  minority  where  the  majority  had  sold  a  Cadell. 
partnership  newspaper  to  a  stranger,  and  some  of  the 
more  active  of  the  majority  had  then   entered  into  a 
fresh  agreement  with  the  purchaser  to  carry  on  the  pa- 
per in  partnership  with   him.     Richards  v.  Davies  (r)  Richards  v. 
went  a  step  further.     There  a  partnership  had  been  en   Davis, 
tered  into  for  a  term  of  years  which  was   still  unexpir-  Defendant 
ed.     The  defendants  would  come  to   no  account  with      UMIlg  to 
the  plaintiff   respecting  the   partnership   dealings   and 
transactions,  but  on  the  application  of  the  plaintiff  a 
decree  for  an  account  of  all  past  transactions  was  made. 
Sir  John  Leach,  in   pronouncing  judgment,  observed 
that  the  plaintiff  had  no  relief  at  law  for  money  due  to 

(n)  1  Mac.  &  G.  294. 

(o)  See  Alder  v.  Fouracre,  3  Swanst.  489,  where  an  injunction 
was  granted  restraining  the  executors  of  a  deceased  partner  who 
had  agreed  for  a  renewal  of  a  lease  from  disposing,  of  the  lease 
when  granted,  except  for  the  benefit  of  the  partnership. 

( p)  4  Madd.  143. 

(q)  Jac.  537. 

(r)  2E.&  >L  347. 


570 


ACTIONS  BETWEEN  PARTNERS. 


Bk.  III. 
Chap.  10. 

Sect.  6. 


Fairthorne  v. 

Weston. 

Defendant 

seeking  to 

drive  plain- 
tiff to  dis- 
solve. 


[  *  498] 


Other  cases. 


him  on  a  partnership  account;  that  if  a  court  of  equity- 
refused  him  relief,  he  would  be  wholly  without  remedy; 
and  in  answer  to  the  objection  that  if  such  a  suit  were 
entertained  the  defendant  might  be  vexed  by  a  new 
bill  whenever  new  profits  accrued  (s),  his  Honour  ask- 
ed what  right  would  the  defendant  have  to  complain 
of  such  new  bill  if  he  repeated  the  injustice  of  with- 
holding what  was  due  to  the  plaintiff? 

Fairthom  v.  Weston  (t)  is  another  authority  in  point. 
In  that  case  two  solicitors  entered  into  partnership  for 
a  term  of  years,  and  before  the  term  expired  the  de- 
fendant conducted  himself  in  such  a  way  as  to  prevent 
the  possibility  of  the  partnership  business  being  car- 
ried on.  The  defendant's  object  was  to  compel  the 
plaintiff  to  dissolve.  The  plaintiff,  however,  instead  of 
dissolving,  tiled  a  bill  for  an  account  of  the  partner- 
ship dealings  and  transactions  since  the  last  settle- 
ment, and  for  a  receiver.  The  defendant  insisted  that 
the  plaintiff  was  entitled  to  no  relief  except  with  a  view 
to  a  dissolution  ;  but  the  Court  held  otherwise,  and 
observed  that  there  was  no  universal  rule  to  the  effect 
that  a  bill,  asking  for  a  particular  account  but  not  for  a 
dissolution,  was  demurrable  ;  and  that  if  *  there  were 
any  such  rule,  a  person  fraudulently  inclined,  might, 
of  his  mere  will  and  pleasure,  compel  his  co-partner  to 
submit  to  the  alternative  of  dissolving  a  partnership, 
or  ruin  him  by  a  continued  violation  of  the  partnership 
contract. 

Again,  where  a  person  seeks  to  establish  a  partner- 
ship with  another  who  denies  the  plaintiff's  title  to  be 
considered  a  partner,  if  the  former  is  successful  upon 
the  main  point  in  dispute,  an  account  of  the  past  deal- 
ings and  transactions  will  be  decreed,  although  the 
plaintiff  does  not  seek  for  a  dissolution  of  the  partner- 
ship which  he  has  proved  to  exist  (u).  Upon  the  same 
principle  it  is  apprehended,  that  if  a  partner  is  wrong- 
fully expelled,  and  he  is  restored  to  his  status  as  partner 
by  the  judgment  of  the  Court,  an  account  will  be  di- 


(s)  This  objection  -was  made  bv  Lord  Elrlon  in  Forman  v. 
Homfray,  2  V.  &  B.  330;  by  V.-C.  Shadwell  in  Loscombe  v.  Rus- 
sell. 4  Sim.  8;  and  by  Baron  Alderson  in  Knebell  v.  White,  2  Y. 
&  C.  Ex.  15. 

(t)  3  Ha.  387. 

(w)  Knowles  v.  Houghton,  11  Ves.  108,  as  reported  in  Collyer 
on  Partn.  198,  note.  The  defendant,  however,  did  not  resist  the 
account  after  the  question  of  partnership  was  decided  against 
him. 


ACCOUNT.  571 

rected,  but  the  partnership  will  not  necessarily  be  dis-  Bk.  III. 

i      j   /     \  i  Chap.  10. 

solved  (X).  _  _    Sect*  6 

As  regards  mines  it  has  also  been  decided,  that  if 


one  co-owner  excludes  another  from  his  share  of  the  Mines, 
profits,  an  account  will  be  directed,  although  no  disso- 
lution is  prayed  (y).  But,  as  each  co-owner  of  amine 
can  sell  his  share  without  the  consent  of  the  other 
owners,  there  is  no  occasion  for  him  to  ask  for  a  disso- 
lution, and  the  case  of  a  mine  is  therefore,  perhaps,  not 
an  apt  illustration  of  the  doctrine  in  question. 

3.   Where  the  partnership  has  proved  a  failure,  and  3.  Account 
the  partners  are  too  numerous  to  be  made  parties  to  the  ^l^^g  u" 
action,  and  a  limited  account  will  result  in  justice  to  fajieti 
them  all,  such  an  account  will  be  directed,  although  a 
dissolution  is  not  asked  for.2     The  leading  case  in  sup- 
port of  this   proposition   is  Wallworth  v.  Holt   (z),  in  Walrworth 
which  Lord  Cottenham,  in  an  elaborate  and  justly  cele-  v-  Holt- 
brated  judgment,  overruled  a   demurrer  to   a  bill  by 
some  of  the  shareholders  of  an  insolvent  joint- stock 
bank,  on  behalf  of  themselves   and  others,  against  the 
directors,  trustees,  and  public  officer  of  the  company, 
and  certain  *  shareholders  who  had  not  paid  up  their  [  *  499] 
calls,  praying  that  an  account  might  be  taken  of  all  the 
partnership   assets,  and    that    the   outstanding  assets 
might  be  got  in  by  a  receiver,  and  that  the  whole  might 
be  converted  into  money,  and  applied  towards  the  satis- 
faction of  the  partnership  debts.     In   delivering  judg- 
ment the  Lord  Chancellor  observed, — 

'"When  it  is  said  that  the  Court  cannot  give  relief  of  this  lim- 
ited kind,  it  is,  I  presume,  meant  that  the  bill  ought  to  have 
prayed  a  dissolution,  aud  a  final  winding  up  of  the  affairs  of  the 
company.  How  far  this  Court  will  interfere  between  partners, 
except  in  cases  of  dissolution,  has  been  the  subject  or  much  dif- 
ference of  opinion,  upon  which  it  is  not  my  purpose  to  say  any- 
thing beyond  what  is  necessary  for  the  decision  of  this  case;  but 

(x)  See  Blisset  v.  Daniel.  10  Ha.  493.  where  the  bill  prayed  for 
a  dissolution,  but  no  dissolution  was  decreed.  In  the  case  of  an 
incorporated  company  this  point  cannot  arise,  Garden  Gully  Co. 
r.  McLister,  1  App.  Ca.  39,  is  an  instance. 

(y)  Bentley  v.  Bates,  4  Y.  &  C.  Ex.  182.  See,  also,  Eedmayne 
v.  Forster,  2  Eq.  467. 

(a)  4  M.  &  Cr.  619. 

1  If  the  firm  A.  &  B.  buy  land  and  A.  gets  the  title  into  his 
own  name,  a  bill  can  be  maintained  by  B.  praying  a  conveyance 
of  an  undivided  half  of  the  tract,  without  resorting  to  dissolution 
and  an  account.  Davis  v.  Davis,  00  Miss.  015  (1B82);  Tniphagen 
v.  Burt,  07  X.  Y.  30  (1870). 

2  Coville  v.  Gilman,  13  W.  Va.  314  (1878). 


572  ACTIONS  BETWEEN  PARTNERS. 


Bk.  III.  there  are  strong  authorities  for  holding  that,  to  a  bill  praying  a 

Chap.  10.         dissolution,  all  the  partners  must  be  parties  (a) ;  and  this  bill 

,  alleges  that  they  are  so  numerous  as  to  make  that  impossible. 

The  result,  therefore,  of  these  two  rules  would  be — the  one  bind- 
ing the  Court  to  withhold  its  jurisdiction,  except  upon  bills  pray- 
ing a  dissolution,  and  the  other  requiring  that  all  the  partners 
should  be  parties  to  a  bill  praying  it — that  the  door  of  this  Court 
would  be  shut  iu  all  cases  in  which  the  partners  or  shareholders 
are  too  numerous  to  be  made  parties,  which,  in  the  present  state 
of  the  transactions  of  mankind,  would  be  an  absolute  denial  of 
justice  to  a  large  portion  of  the  subjects  of  the  realm,  in  some  of 
the  most  important  of  their  affairs.  This  result  is  quite  sufficient 
to  show  that  such  cannot  be  the  law.'' 

In  Walhvorth  v.  Holt,  the  bill  was  filed  for  the  sole 
purpose  of  having  the  assets  of  the  company  applied  in 
payment  of  its  joint  debts;  it  did  not  pray  an  account 
of  the  partnership  dealings  and  transactions,  for  the 
purpose  of  obtaining  a  division  of  the  profits  (if  any) 
amongst  the  persons  entitled  thereto.  If  it  had,  prob- 
ably a  decree  would  have  been  refused,  either  because 
a  dissolution  ought  to  have  been  asked,  or  because  all 
the  shareholders  were  not  parties  to  the  bill   (6).     But 

Later  cases,  since  Wallworth  v.  Holt  other  cases  have  been  decided, 
in  which  bills  praying  for  a  division  of  the  surplus  as- 
sets amongst  the  shareholders,  but  not  expressly  pray- 
ing for  a  dissolution,  have  been  held  good  on  de- 
murrer (c).  The  case  which  has  gone  furthest  in  this 
*  500]         direction  is  Sheppard  v.  Oxenford  (d);  for  *  there  every 

sheppard  v.  kind  0f  relief  which  would  have  been  required  in  the 
event  of  a  dissolution  was  prayed  for,  although  a  dis- 
solution in  terms  was  not  asked  for.  In  Sheppard  v. 
Oxenford,  a  number  of  persons  formed  an  association 
for  working  mines  in  Brazil.  The  defendant  was  the 
sole  trustee  of  the  property,  and  the  sole  director.  Dis- 
putes having  arisen,  a  bill  was  filed  by  a  shareholder  on 
behalf  of  himself  and  all  the  other  shareholders  against 
the  defendant  for  an  account  of  the  monies  received  and 
paid  by  him  on  behalf  of  the  association,  and  for  an  ac 
count  of  its  debts,  and  for  their  payment  out  of  the 
available  assets,  and  for  a  sale,  if  necessary  for  that 

(a)  See  as  to  this,  ante,  p.  461. 

(b)  See  Kichardsou  v.  Hastings,  7  Beav.  323,  and  11  ib.  17; 
Deeks  v.  Stanhope.  14  Sim.  57,  which  were  similar  cases  to  Wall- 
worth  v.  Holt. 

(c)  See  Apperly  v.  Page,  1  Ph.  779;  Wilson  v.  Stanhope,  2  Coll. 
629;  Cooper  v.  Webb,  15  Sim.  454,  and  Clements  v.  Bowes,  17  ib. 
167. 

{d)  1  K.  &  J.  491. 


DISCOVERY.  5T3 

purpose,  of  part  of  the  property,  and  for  a  division  of  Bk.  III. 
profits.     The  bill  also  prayed  an  injunction  to  restrain  ^P'10, 

the  defendant  from  selling  or  disposing  of  the  property, ! 

and  for  a  receiver  to  get  in  the  debts  due  to  the  associa- 
tion, and  to  manage  the  affairs  thereof,  until  the  ac- 
counts were  taken,  but  no  dissolution  was  asked.  A 
demurrer  to  this  bill  was  put  in  and  overruled  (e),  and 
an  injunction  was  granted  restraining  the  defendant 
from  selling  or  disposing  of  the  property  otherwise  than 
in  the  ordinary  course  of  business;  and  a  receiver  and 
manager  of  the  property  in  this  country  was  appointed. 
It  is  to  be  observed  that,  although  this  was  a  case  of  a 
mine,  the  mine  was  in  a  foreign  country,  and  was, 
strictly  speaking,  partnership  property,  and  not  merely 
so  much  land  belonging  jointly  or  in  common  to  several 
co-owners. 

Having  regard  to  the  decisions  in  Shepparcl  v.  Oxen-  Result  of 
ford,  and  other  modern  cases  of   a   similar  kind,    espe-  latest  cases, 
cially  Apperly  v.  Page  (/)  and  Clements  v.  Bowes  (g), 
it  is  conceived  that  the  doctrine  established  in   Wall- 
worth  v.  Holt  may  be  considered  as  extending  not  only 
to  cases  where  an  account  is  sought  for  the  purpose  of 
having  joint  assets  applied  in  discharge  of  the  joint  lia- 
bilities, but  also  to  cases  where  an  account  is  sought  for 
the  additional  purpose  of  obtaining  a  division  of  the 
surplus  assets  and  profits  amongst  the  persons  entitled 
thereto.     If  this  be  so,  the  last  remnant  of  the  doctrine 
that,  in  partnership  cases,  there  can  be  no  account  with- 
out a  dissolution,  must  be  considered  as  swept  away,  at 
least  as  regards  partnerships  *  the  members  of  which  [  *  501  ] 
are  too  numerous  to  be  made  parties  to  the  action. 

A  claim  for  an  account  need  not  contain  an  offer  by  Offer  by 

the  plaintiff  to  pay  what,  if  anything,  maybe  found  due  p  aintltl  to 
„       r    .  ,    i  •  i  ,    /  ,[  Pay  what  is 

from  him  on  taking  such  account  (h).  due  from 

An  action  for  an  account  of  partnership  dealings  is  him. 
not  objectionable,  simply  because  it  relates  to  the  deal-  Action  for 
ings  of»several  partnerships,  if  they,  in   point  of  fact,  account  of 
are  nothing  more  than  continuations  of  one  firm  (i).1  sexera 
But  an  action  which  involves  the  taking  of  an  account 
of  the  dealings   and    transactions  of    two  co-existing 
firms,  may  be  open  to  objection  on  the  ground  of  prac- 
tical inconvenience  (k). 

Before  the  Judicature  acts   a  bill  in  equity  against 

(<?)  See  1  K7&  J.  50L         (/)  1  Ph.  779^  {g)  17  Sim.  167. 

(h)  The  Columbian  Government  v.  Rothschild,  1  Sim.  103. 
(i)  See  Jefferys  v.  Smith,  3  Russ.  158. 
(k)  See  Rheam  v.  Smith,  2  Ph.  726. 

1  See  Burchard  v.  Boyce,  21  Ga.  6  (1857). 


574  ACTIONS  BETWEEN  PARTNERS. 

Bk.  III.  two  persons  praying  for  relief  against  one,  and  in   the 

Chap.  10.        event  of  the  plaintiff  not  being  entitled  to  relief  against 

Sect'  6' him,  then  for  relief  against  the   other,  was  demurra- 

Alternative     ble  (Z).      But  now  if  the  several  defendants  are  so  con  - 
cases.  nected  together  as  to  render  their  respective  liabilities 

doubtful,  they  can  be  all  sued  in  one  action,  unless  it 
is  so  embarassing  as  to  be  incapable  of  being  fairly  and 
properly  tried  (m). 
Motion  before  In  an  action  for  a  partnership  account,  if  the  partner- 
hearing,  ship  is  admitted,  and  there  is  in  fact  nothing  in  dis- 
pute between  the  parties  except  the  accounts,  an  order 
directing  them  may  be  obtained  before  the  trial  of  the 
action  (n).1 
2.  Discovery.  2.  As  to  discovery  and  production  of  documents. — 
The  right  of  every  partner  to  a  discovery  from  his  co- 
partner of  all  matters  relating  to  the  partnership  deal- 
ings and  transactions  is  as  incontestable  as  his  right 
to  an  account;  and  such  right,  like  the  right  to  an  ac- 
count, devolves  upon  and  is  enforceable  against  a  part- 
ner's legal  personal  representatives  and  trustees  in 
bankruptcy. 

If  a  partner  chooses   to  mix  up  partnership  accounts 
[  *  502]        with  *  his  own  private  accounts  he  must  produce  the 
whole,  unless  he  can  satisfactorily  sever  them  (o). 

How  far  discovery  can  be  required  from  an  alleged 
partner  who  denies  the  partnership  alleged,  will  be  ex- 
amined hereafter;  in  the  present  place  it  will  be  suffi- 
cient to  allude  to  a  few  points  of  practical  importance 
arising  where  the  right  to  discovery  is  not  denied. 
Oppressive  ^  Party  to  an  action  for  an  account  is  often  required 

interroga-       to  set  forth  in  answer  to  interrogatories,  details   which 
tories.  it  is  impossible  for  him  to  remember,  and  to   ascertain 

which  inquiry  and  study  are  necessary;  but  all  that  he 
is  bound  to  do  is  to  furnish  the  interrogator  with  every 
means  of  information  possessed  or  obtainable  by  him- 
self, leaving  the  interrogator  to  make  what  he  can  of 
the  materials  thus  furnished  to  him.  The  party  inter- 
rogated is  not  bound  to  digest  accounts,  nor  to  set  cut 

(/)  Seddon  v.  Connell,  10  Sim.  79. 

(m)  See  Orel.  xvi.  rr.  4  and  7;  xviii.  r.  1;  xix.  r.  27:  and  com- 
pare Honduras,  &c,  Co.  v.  Lefievre,  2  Ex.  D.  301.  with  Evans  v. 
Buck,  4  Ch.  D.  432;  Child  v.  Stenning,  5  ib.  695;  Bagot  r.  Eas- 
ton,  7  ib.  1.  See  the  obs.  of  Lord  Selborne  in  Burstall  v.  Bev- 
fus,  26  Ch.  D.  39. 

(n)  Turquand  v.  Wilson.  1  Ch.  D.  85. 

(o)  See  Pickering  v.  Pickering,  25  Ch.  D.  247. 


1  If  the  partnership  alleged  in  the  bill  be  admitted  in  the  an- 
swer, uuless  the  complaint  has  been  guilty  of  laches,  an  order 
to  account  is  of  course.     Glenn  v.  Hebb,  12  Gill.  &  J.  271  (1841). 


DISCOVERY  AND  PRODUCTION  OF  DOCUMENTS.  575 

voluminous  accounts  existing  already  in  another  shape,  Bk.  III. 
and  which    he   offers  to  produce.      Thus,  in   Christian  Chap.  10. 
v.  Taylor  ( p),  in  which  the  executor  of   one    deceased 


partner  filed  a  bill  for  an  account  against  the  execu-  Christian  v. 
tors  of  another  deceased  partner,  and  required  them  Taylor- 
to  set  out  in  detail  many  complicated  and  voluminous 
accounts,  it  was  held  that  they  were  not  bound  to  do  so; 
that  they  were  under  no  obligation  of  going  through 
the  books  for  the  purpose  of  giving  the  plaintiff  the  in- 
formation which  he  asked;  and  that  the  defendants 
could  not  be  compelled  to  do  more  than  to  refer  to 
the  books  and  documents  in  their  possession  in  such  a 
way  as  to  entitle  the  plaintiff  to  have  them  produced 
for  his  inspection  (q). 

Where,  however,  there  are  specific  questions,  it  is  not  Drake  v. 
sufficient  to  refer  generally  to  books  and  say  that,  save  Synies. 
as  therein  appears,  no  answer  can  be  given.     The  per- 
son answering  must  go  a  step  further,  and  point  out 
where  in  particular  the  information  required  by  each 
interrogatory  is  to  be  found  (r). 

*A  person  interrogated  as  to  what   he  has  done  by  [  *  503] 
himself  or  his  agents  (s),  is   bound  to  state  what  he  Person 
knows,  to  make  inquiries  of  his  agents  and  servants,  to  ^^nfake*1 
obtain  documents  to  the  possession  of  which  he  has  a 
right,  and  to  afford  his  opponent  either  the  information 
sought,  or  all  the  means  of  obtaining  information  which 
the  answerer  himself  possesses  (t).     A  person  who  has 
it  in  his  power  to  obtain  information  cannot  escape  from 
discovery  simply  by  saying  be  does  not  know:  he  must 
make  reasonable  efforts  to  inform  himself  (u). 


inquiries. 


(p)  11  Sim.  401. 

(?)  See,  too,  Lockett  v.  Lockett,  4Ch.  336;  White  v.  Barker, 
5  De  G.  &  Sm.  746;  Seeley  v.  Boehm,  2  Madd.  176.  A  defend- 
ant is  not  entitled  to  set  out  the  accounts  sought  for  in  a  book, 
and  to  refer  to  the  book  instead  of  scheduling  the  accounts  to 
the  answer.     See  Telford  v.  Ruskin,  1  Dr.  &  Sm.  148. 

(r)  Drake  v.  Symes,  Johns.  647.  See,  as  to  taking  oppressive 
interrogatories  off  the  file,  S.  C.  2  De  G.  F.  &  J.  81,  and  gener- 
ally on  this  subject  Wigram  on  Discovery,  165 — 169;  Bray  on 
Disc,  book  i.  ch.  4,  §  6. 

(s)  Rasbotham  v.  Shropshire  Union  Rail.  &c,  Co.,  24  Ch.  D. 
110. 

(t)  As  to  what  accountant's  reports,  &c.,  are  privileged,  see 
Walsham  v.  Stainton,  2  Hem.  &  M.  1 ;  Wilson  r.  Northampton  & 
Banbury,  &c,  Rail.  Co.,  14  Eq.  477.  As  to  setting  out  a  list  of 
the  debtors  to  the  firm,  see  Telford  v.  Ruskin,  1  D.  R  &  Sm.  148, 
where  it  was  held  that  such  a  list  must  be  given.  Compare  the 
observation  of  V.-C.  Wood  in  Drake  r.  Symes,,  Johns.  651. 

(w)  See  Bolckow  v.  Fisher.  10  Q.  B.  D.  161 ;  Taylor  v.  Rnndell, 
(No.  1),  11  Sim.  391,  and  Cr,  &  Ph.  104;  Taylor  v.  Rundell  (No. 
2),  1  &  Y.  C.  C.  128,  and  1  Ph.  222;  Stuart  v.  Lord  Bute,  11  Sim. 


76 


ACTIONS  BETWEEN  PARTNERS. 


Bk.  III. 

Chap.  10. 
Beet.  6. 


Production 
ot  docu- 
ments. 


[  *  504] 


Murray  v. 
Walter. 


Agreement 
precluding 
inspection. 


In  case  it  becomes  necessary  for  a  person  interrogated 
to  remove  obstacles  thrown  in  his  way,  he  should  apply 
for  further  time  to  answer,  and  not  put  in  answer, which 
is  insufficient  (x). 

In  connection  with  this  subject  it  may  be  useful  to 
remind  the  reader  of  the  rule,  that  a  person  cannot  be 
compelled  to  produce  books  which  belong  to  himself  and 
others  who  are  not  before  the  Court.  Thus  in  Murray 
v.  Walter  (y),  the  defendant  in  his  answer  stated,  that 
certain  books  relating  to  a  concern  in  which  the  plain- 
tiff claimed  to  be  a  partner  with  the  defendant,  were  in 
the  possession  of  the  treasurer  of  the  concern  on  be- 
half of  the  several  shareholders  in  it,  many  of  whom 
were  not  parties  to  the  suit;  and  it  was  held  that  the 
defendant  could  not  be  compelled  to  produce  the  *books 
in  question,  although  it  was  insisted,  on  the  authority 
of  Walburn  v.  Ingilby  (z),  that  the  plaintiff  had  aright 
to  have  whatever  access  to  the  books  the  defendant  him- 
self was  entitled  to.  There  are  several  other  decisions 
to  the  same  effect  as  Murray  v.  Walter  (a);  but  the 
doctrine  there  laid  down  does  not  apply  to  cases  in 
which  the  absent  parties  interested  in  the  books  are  in 
fact  represented  by  the  defendants  on  the  record,  and 
have  no  interest  in  conflict  with  theirs  (b);  nor  it  is 
said  to  an  action  by  a  cestui  que  trust  against  a  trustee 
who  is  charged  with  trading  with  trust  monies  in  part- 
nership with  other  persons  not  before  the  Court  (c). 

If  the  plaintiff  has  agreed  to  accept  the  defendant's 
statements  of  profits,  and  not  to  investigate  his  books 
and  accounts,  the  defendant  will  not  be  compelled  to 
produce  them  before  the  hearing  of  the  action  (d). 

A  person  who  obtains  an  order  for  the  production  of 

442,  and  12  ib.  460;  A.-G.  v.  Rees,  12  Beav.  50;  Earl  of  Glengall 
v.  Fraser,  2  Ha.  99.  and  compare  Martineau  v.  Cox,  2  Y.  &  C.  Ex. 
638,  where  it  was  held  that  a  partner  here  in  a  firm  carrying  on 
business  in  a  foreign  country,  was  not  bound  to  set  out  a  list  of 
documents  in  the  possession  of  the  partners  abroad. 

(x)  Tavlorv.  Rundell  (No.  2),  1  Ph.  222;  Pickering  v.  Rigbv, 
18  Ves.  484. 

(y)  Cr.  &  Ph.  114.  The  interest  of  the  absent  parties  must  be 
stated,  Bovil  v.  Cowan,  5  Ch.  495. 

(z)  1  M.  &  K.  79. 

(a)  Hadley  v.  M'Dougall.  7  Ch.  312;  Reid  v.  Langlois,  1  Mac. 
&  G-.  627;  Burbidge  v.  Robinson,  2  Mac.  &  G.  244;  Penney  v. 
Goode,  1  Drew.  474;  Stuart  v.  Lord  Bute,  11  Sim.  453.  Compare 
Vyse  v.  Foster,  13  Eq.  602. 

(6)  Glyn  v.  Caulfeild,  3  Mac.  &  G.  463. 

(c)  See  Vyse  v.  'Foster,  13  Eq.  602,  which,  however,  turned  on 
the  sufficiency  of  an  affidavit  of  documents.  See  Freeman  v. 
Fairlie,  3  Mer.  43. 

(d)  Turney  v.  Bayley,  4  De  G.  J.  &  S.  332. 


AS  TO  PAYMENT  INTO  COURT.  577 

documents  is  entitled  not  only  to  inspect  them  himself,  Bk.  III. 
but    to    have   them    inspected   by    his    solicitors     and  g~^"fl    ' 
agents  (e);  but  not  by  an  agent  to  whom  his  opponents  " 


reasonably  object  (/).  But  neither  he  nor  they  are  en-  Inspecting 
titled  to  make  public  the  information  they  obtain  by  documents, 
means  of  such  inspection.  The  order  is  made  with  a 
view  to  the  administration  of  justice  between  the  liti- 
gant parties;  and  an  injunction  will,  if  necessary,  be 
granted  to  restrain  the  communication  to  strangers  of 
what  may  be  ascertained  in  the  course  of  an  examina- 
tion of  the  books  and  documents  produced  under  the 
order  (e). 

The   common   order  does  not  entitle  the  person  in  Inspection  by 
whose  favour  it  is  made  to  inspect  by  a  professed  ac-  *C™™J*nts' 
countant  specially  *  appointed  for  the  purpose;  but  if  L     5UoJ 
there  is  any  necessity  for  so  doing,  a  special  order  for 
inspection  by  such  a  person  will  be  made  (h). 

Books  in  use  for  daily  business  are  ordered  to  be  pro-  Books  in 
duced  at  the  place  where  they  are  usually  kept  ;  and  constant  use. 
they  will  not  be  ordered  to  be  deposited  in  court  unless 
there  is  some  special  reason  for  so  doing  (i). 

3.  As  to  payment  into  court. — If,  in  an  action  by  one  3.  Payment 
partner  against  another  for  an  account,  the  defendant  of  partner- 
admits  that  he  has  in  his  hands  money  belonging  _  to  gjjP  ™°™es 
the  firm,  or  that  he  had  such  money,  and  if  he  admits, 
or  if  it  otherwise  plainly  appears  \k)  that  he  ought  to 
have  it  still,  he  can  be  compelled  to   pay    such    money 
into  court  before  the  hearing  of  the  action  (Z).     As   a 
general  rule,   however,   a  partner  having  partnership 
monies  in  his  hands,  cannot  be  made  to  pay  those  monies 
into  court  before  trial,  if  he  insists  that  on  taking  the  ac- 
counts a  balance  will  be  found  due  to  him  (m).  Nor  will 
he  be  compelled  so  to  do  unless  the  other  partners   will 
pay  in  what  they  may  have  in   their  hands  (n).     Nor 

(e)  Williams  v.  Prince  of  Wales'  Life,  &c,  Co.,  23  Beav.  338. 

(/)  Dadswell  v.  Jacobs,  34  Ch.  D.  278.  See,  also,  Diaper  v. 
Manchester  &  Sheffield  Kail.  Co.,  7  Jur.  N.  S.  86. 

(h)  Bonnardet  v.  Taylor,  1  J.  &  H.  383. 

(1)  Mertens  v.  Haigh,  Johns.  735. 

(k)  An  admission  of  liability  to  pny  is  not  necessary.  See 
Wanklyn  v.  Wilson,  35  Ch.  D.  180  ;  Dunn  v.  Campbell,  27  Ch. 
D.  254,  note. 

(/)  In  White  v.  Barton,  18  Beav.  192,  an  admission  by  one 
partner  that  he  and  his  co-partner  who  was  not  a  party  had 
money  in  their  hands  was  held  sufficient. 

(to)  Richardson  v.  The  Bank  of  England.  4  M.  &  Cr.  loo.  But 
inBirleyu  Kennedy,  C>  N.  R.  395.  a  partner  who  had  admitted 
that  he  had  drawn  out  more  than  he  ought  was  ordered  to  pay 
the  excess  into  court. 

(n)  Foster  v.  Donald,  1  J.  &  W.  252. 
*  14  LAW   OF   PARTNERSHIP. 


►  7S  ACTIONS  BETWEEN  PARTNERS. 


Bk.  III.  will  a  partner  be  ordered  before  trial  to  pay  into  court 

Chap.  10.        ^e  amount  of  a  debt  due  from  him  to  the  firm,  if  the 

ec  ' amount  to  which  he  is  indebted  is  not  admitted,   and 

cannot  be  readily  ascertained  (o).  But  if  a  partner 
admits  that  he  has  partnership  monies  in  his  hands, 
and  it  appears  from  his  own  statements  that  they  came 
there  improperly  (p),  or  in  the  violation  of  good  faith, 
[  *  506]  he  will  be  *  compelled  to  pay  them  into  court  (q);  so  if 
he  admits  facts  from  which  it  appears  that  he  is  indebted 
to  the  firm  in  a  certain  sum,  and  he  does  not  insist  that 
on  the  whole  the  firm  is  indebted  to  him,  the  money  ad- 
mitted by  him  to  be  due  will  be  ordered  into  court  (r). 
After  trial  the  court  will  order  a  partner  to  pay  into 
court  a  sum  which  is  plainly  due  from  him,  although 
no  certificate  to  that  effect  may  have  been  made  (s). 

If  the  partnership  debts  are  unpaid,  and  the  defend- 
ant is  liable  to  be  sued  for  them,  the  order  directing 
payment  into  court  should  reserve  to  him  liberty  to 
apply  for  payment  out  of  court,  of  the  amount  of  the 
debts  he  may  be  compelled  or  pressed  to  pay  (t).1 

(b)   Of  the  defences  to  an  action  for  an  account  and  discovery   be- 
tween partners  and  persons  claiming  under  them. 

The  defence  on  the  ground  of  illegality,  of  fraud,  of 
laches  on    the   part  of  the   plaintiff,   and  of  want   of 

(o)  See  Mills  v.  Hanson,  8  Ves.  68  ;  Wanklyn  v.  Wilson,  ante, 
note  (/.'). 

( p)  See  Costeker  v.  Horrox.  3  Y.  &  C.  Ex.  530,  where  a  sur- 
viving partner,  being  also  the  executor  of  his  deceased  co-partner, 
was  ordered  to  pay  into  court  7000/.,  the  amount  of  assets  of  the 
deceased  improperly  applied  to  partnership  purposes.  See  the 
next  note. 

(q)  Jervis  v.  White,  6  Ves.  738  ;  Foster  v.  Donald.  1  J.  &  W. 
252  ;  in  the  first  of  these  cases  the  motion  was  made  before 
answer.  In  Hichens  v.  Congreve,  1  R.  &  M.  150.  note,  and 
Gaskell  v.  Chambers,  26  Beav.  360,  directors  obtaining  secret 
benefits  for  themselves  were  ordered  to  pay  the  monies  received 
by  them  into  court.  Compare  Hagell  v.  Carrie.  2  Ch.  449,  where 
the  liability  of  the  defendants  did  not  sufficiently  appear. 

(r)  Toulmin  v.  Copland.  3Y.  &C.  Ex.  643  :  Costekeru.  Horrox, 
3  Y.  &  C.  Ex.  530.  In  Domville  v.  Solly.  2  Russ.  372.  an  order 
was  made  though  the  defendants  insisted  that  the  plaintiff  was 
entitled  to  nothing. 

(s)  London  Syndicate  v.  Lord,  8  Ch.  D.  84  ;  Creak  v.  Capell, 
6  Madd.  114. 

(t)  Toulmin  e.  Copland,  3  Y.  &  C.  Ex.  643.  In  S.  C.  6  Price, 
405,  it  was  held  that  a  surviving  partner  was  not  entitled  to  have 
partnership  funds,  on  which  the  plaintiffs  had  put  a  distringas, 
transferred  to  him  to  enable  him  to  pay  outstanding  debts. 

1  If  firm  debts  are  still  to  be  paid,  payment  into  court  by  the 
debtor  partner  of  the  amount  found  due  ought  to  be  ordered. 
Carper  i:  Hawkins,  a  W.  Va.  291  (1875). 


DEFENCES  TO  ACTIONS  FOR  AN  ACCOUNT,  ETC.  57t> 

proper  parties  to  the  action,  have    already  been   exam-  Bk.  III. 
ined  (u).1     In  addition,  however,  to  these  grounds  of  g  *p"g 

defence,  there    are    others    which  require  notice,  and  . L — ! 

which  cannot  be  more  conveniently  alluded  to   than    in 
the  present  place,  and  under  the  following  heads. 

*  1.  Denial  of  partnership.  I     oK)i\ 

2.  Statute  of  Limitations. 

3.  Account  stated. 

4.  Award. 

5.  Payment,  and  accord  and  satisfaction. 

6.  Release. 

1.  Denial  of  Partnership. — An  action  by  one  partner  1.  Denial  by 
against  another  for  an  account  of   the  dealings  and  defendant  of 
transactions  of  an  alleged  partnership  may  be  met  by  pa^nei?hiT» 
a  denial  of  the  existence  of  any  such  partnership  (x). 
This  defence  if  relied  upon  as  a  reason  for  not  answer- 
ing interrogatories  or  making  a  discovery  of  documents 
must  be  accompanied  by  statements  on  oath  denying 
those  allegations  which,  if  true,  would  establish  the  part- 
nership, and  denying  the  possession  of  documents  rele- 
vant to  the  question  of  partnership  or  no  partnership, (y).~ 
In  Mansell  v.  Feeney  (z)  it  was  held  that  the  plaintiff  Mansell  t-. 
was  entitled  to  an  inspection  of  all  documents  admitted    eene^  • 
by  the  defendant  to  be  in  his  possession  and  to  be  re- 
levant to  the  matters  in  question  in  the  suit,  although 
the  defendant  denied   the  partnership  alleged  by  the 
bill,  and   also  denied  that  the  documents  in  question 
tended  to  prove  its  existence.     The  defendant,  however, 
was  allowed  to  seal  up  those  parts  of  the  books  which 
he  swore  had  no  relation  to  the  matters  in  question. 

Before  the  Judicature  acts  it  was  a  rule  in  equity 
that  except  in  one  or  two  cases  a  defendant  could  not 
by  answer  (as  distinguished  from  a  plea),  protect  him- 
self from  giving  discovery  ;  if  he  answered  at  all  he  had 

(m)  See,  as  to  illegality,  ante,  p.  102  et  seq. ;  as  to  fraud,  ante, 
p.  479  et  seq.;  as  to  laches,  ante,  p.  466  et  seq.;  as  to  parties,  ante, 
p.  459  et  seq. 

(x)  Drew  v.  Drew,  2  V.  &  B.  159  ;  Hare  v.  London  and  North- 
Western  Kail.  Co.,  John.  722,  is  an  instance  in  which  a  bill  was 
successfully  met  by  a  plea  denying  that  the  plaintiff  was  a  share- 
holder in  the  company. 

(y)  Mansell  v.  Feeney,  2  J.  &  H.  31:5 ;  Harris  v.  Harris,  3  Ha. 
450  ;  Sanders  r.  King,  6  Madd.  61. 

(z)  2  J.  &  H.  320.     See,  also,  Saull  v.  Browne,  9  Ch.  364. 

1  To  enable  the  defendants  to  obtain  an  account  or  a  decree  for 
payment  of  a  balance  against  the  complainant  it  is  not  necessary 
for  them  to  tile  a  cross  bill.  Atkinson  v.  Cash,  79  111.  53  (1875); 
Johnson  v.  Buttler,  31  N.  J.  Eq.  35  (1879). 

2  Everitt  v.  Watts,  10  Paige,  82  [1843). 


580  ACTIONS  BETWEEN  PARTNERS. 


Bk.  III.  to   answer  fully  (a).     This  rule,  which   no  longer  ex- 

Chap.  10.        iats  (5^  was  0ften   productive  of  great  hardship  ;  but 
SfcCt-  6-  in  conformity  with  it,  a  person  sued  for  a  partnership 

account  was  not  allowed  by  answer  to  deny  the  alleged 
partnership,  and  excuse  himself  on  that  ground  from 
setting  forth  accounts,  or  producing  documents  which 
[  *50S]  the  *  plaintiff  required  to  see  (c).  However,  notwith- 
standing this  rule,  the  Court  in  more  than  one  instance 
declined  to  enforce  it  ;  and  ordered  applications  for 
discovery  in  such  cases  to  be  postponed  until  after  the 
necessity  for  making  them  appeared  (d);  and  as  now  a 
court,  or  judge  at  chambers,  can  order  any  question  in 
dispute  to  be  tried  before  any  other  (e),  a  person  deny- 
ing an  alleged  partnership  can  easily  be  protected 
against  a  vexatious  or  oppressive  exercise  of  a  right  to 
discovery.  Whilst  on  the  one  hand  he  must  give  all 
such  discovery  as  bears  upon  the  question  of  partnership 
or  no  partnership,  he  will  not  be  compelled  to  set  out 
accounts  or  produce  documents  which  he  swears  throw 
no  light  on  that  question  and  can  only  be  material  after 
it  has  been  decided  in  favour  of  the  plaintiff  (/). 
2.  Statute  of  2.  The  Statute  of  Limitations.— The  Statute  of  Limi- 
Limitations.  tations,  21  Jac.  1,  c.  16,  §  3,  enacts  that  all  actions  of 
account  (other  than  for  such  accounts  as  concern  the 
trade  of  merchandise  between  merchant  and  merchant, 
their  factors  and  servants  (g)  shall  be  commenced  and 
sued  within  six  years  next  after  the  cause  of  such 
action  or  suit.  Before  the  Judicature  acts  a  court  of 
equity  was  as  much  bound  by  this  statute  as  a  court  of 
law  (h) ;  and  advantage  could  betaken  of  it  by  plea  (i), 

(a)  See  Elmer  v.  Creasy,  9  Ch.  69. 
(6)  Ord.  xxxi.  r.  6. 

(c)  Hall  v.  Noyes,  3Bro.  C.  C.  4-)3 ;  v.  Harrison.  4  Madd. 

252  ;  Shaw  v.  Clung,  11  Ves.  303  ;  Somervillei^Mackay,  16  Yes. 
382;  The  Great  Luxembourg  Rail.  Co.  r.  Magnay,  23  Beav.  646  ; 
Eeade  v.  Woodrooffe,  24  ib.  421  ;  Bleckley  v.  Kymer.  4  Drew. 
248  ;  Mansell  v.  Feeney,  2  J.  &  H.  313  ;  Thompson  r.  Dunu,  5 
Ch.  573  ;  Saull  v.  Browne,  9  Ch.  364. 

(d)  Clegg  D.  Edmondson,  8  De  G.  M.  &  G.  787  ;  De  La  Rue  v. 
Dickinson,  3  K.  &  J.  388 ;  Lockett  v.  Lockett,  4  Ch.  336  ;  Great 
Western  Coll.  Co.  v.  Tucker,  9  Ch.  376  ;  Carver  v.  Pinto  Liete, 
7  Ch.  90  ;  Wier  v.  Tucker,  14  Eq.  25. 

(e)  Ord.  xxxvi.  r.  8. 

(/)  See  Be  Leigh's  estate.  6  Ch.  D.  256  ;  Parker  r.  Wells,  18 
ib.  477  ;  Whyte  v.  Ahrens,  26  ib.  717. 

(g)  See.  as'to  this  exception,  Robinson  v.  Alexander.  8  Bli.  N. 
S.  352.  and  2  CI.  &  Fin.  717,  and  the  cases  there  referred  to. 

(7t)  Knox  v.  Gye,  L.  R.  5  H.  L.  656  :  Foley  v.  Hill,  1  Ph.  399  ; 
Hovenden  v.  Annesley,  2  S.  Ch.  &  Lef.  607  ;  and  see  Whitley  v. 
Lowe,  25  Beav.  421,  and  2  D.  G.  &  J.  704. 

({]  See  Bridges  v.  Mitchell,  Bunb.  217  ;  Whitley  v.  Lowe,  25 


DEFENCES  TO  ACTIONS  FOR  AN  ACCOUNT,  ETC.  5S1 

or  *  by  answer  (k),  or  by  demurrer  if  the  facts  suf-  [  *  ti09] 
ficiently  appeared  on  the  face  of  the  bill  (I).1  Bk.  III. 

The  exception  as  to  merchants'  accounts  was  repealed  ^    t11'      ' 

by  19  &  20  Vict.  c.  97,  §  9.     Whilst  that  exception  was ___ 

in  force  the  statute  of  James  was  held  not  to  apply  to 
suits   for  an   account  between  partners  (m);  although  Tatam  ,. 
even  then  where  a  partner  died,  and  seventeen  years  Williams* 
afterwards  a  bill  for  an  account  was  filed  against  his 
executors  by  the  surviving  partners,  the  bill  was   dis- 
missed with  costs   (n). 

The  authorities  which  have  been  already  referred  to  Merchants' 
also  show  that  before  the  act  19  &  20  Vict.  c.  97,  §  9,  accounts, 
the  statute  of  limitations  did  not  apply  to  open  unset- 
tled accounts,  extending  from  a  time  more  than  six  years 
before  a  bill  was  filed,  down  to  a  time  within  such  six 
years.  Notwithstanding  the  words  of  the  statute  of 
James,  "  All  actions  of  account shall  be  com- 
menced and  sued,"  &c,  it  was  held  that,  even  as  be- 
tween persons  who  were  not  within  the  exception  as  to 
merchants'  accounts,  the  statute  did  not  begin  to  run  so 
long  as  the  account  was  continued  (o);  and  that  the 
statute  did  not,  in  any  case,  apply  to  an  unsettled,  open, 
mutual  account,  with  items  on  both  sides  representing 

Beav.  421,  and  2  De  G.  &  J.  704  ;  Welford  v.  Liddel,  2  Ves.  S. 
400  ;  Beanies'  Pleas  in  Eq.  161.  In  Robinson  v.  Field,  5  Sim. 
14,  and  Jones  v.  Pengree,  6  Ves.  580,  the  plea  was  overruled  as 
covering  too  much. 

(A)  As  in  Martin  v.  Heathcote,  2  Eden,  169  ;  Barber  v.  Barber, 
18  Ves.  286  ;  Tatam  v.  Williams,  3  Ha.  347. 

(/)  Foster  v.  Hodgson,  19  Ves.  180 ;  Hoare  r.  Peck,  6  Sim.  51  ; 
Pro  nee  v.  Svmpson,  Kay,  678.     See  also,  since,  Noyes  v.  Crawley, 

10  Ch.  D.  31. 

(m)  Martin  v.  Heathcote,  2  Eden,  169;  Barber  v.  Barber,  18 
Ves.  286,  and  some  other  older  cases  to  the  contrary  were  over- 
ruled by  Robinson  r.  Alexander.  2  CI.  &  Fin.  717. 

(w)  Tatam  v.  Williams,  3  Ha.  347. 

(o)  See  per  Lord  Eldon  in  Foster  v.  Hodgson,  19  Ves.  185; 
Scudemore  v.  White,  1  Vern.  456. 

1  In  Equity  the  Statute  of  Limitatians  is  inoperative  directly, 
but  chancellors  have  by  its  provisions  always  measured  laches 
against  which  they  will  refuse  relief,  in  cases  analogous  to  these 
governed  by  it  at  law.  In  many  of  the  States,  the  code  provi- 
sions upon  the  subject  of  limitations  govern  all  actions  of  what- 
ever nature.  In  the  absence,  therefore,  of  an  exception  in  favor 
of  merchants'  accounts,  it  may  be  said  generally  that  the  right 
to  demand  an  accounting  must  be  exercised  within  the  time 
prescribed  by  the  Statute  of  Limitations.  See  McKelvy's  Ap- 
peal, 72  Pa."  St.  409  (1872);  Arnett  v.  Finney,  41  N.  J.  Eq.  147 
(1886);  Quagle  v.  Guild.  91  111.  378  (1878);  Godden  v.  Kimmell, 
99  U.  S.  201(1878);  Blackwell  v.  Claywell,  75  N.  C.  213  (1876); 
McKaig  v.  Hebb,  42  Md.   227  (1674);  Allen  v.  Woonsocket  Co. 

11  R.  I.  288  (1875);  Coudrey  v.  Gilliam,  60  Mo.  86  (1875). 


582 


ACTIONS  BETWEEN  PARTNEKS. 


Bk.  III. 
Chap.  ID. 
Sect.  G. 

Application 
of  statute  to 
current 
accounts. 


[*510] 


cross  demands  (p).  The  law  in  this  respect  was  modi- 
fied by  Lord  Tenterden's  act  (q),  the  effect  of  which  is, 
.  that,  although  there  may  be  a  mutual  open  running  ac- 
count, the  mere  existence  of  items  not  barred,  is  not 
sufficient,  in  actions  of  debt  or  assumpsit,  to  take  earlier 
items  out  of  the  statute  of  limitations  (r).  Lord  Ten- 
terden's act,  however,  did  not  apply  to  merchants'  ac- 
counts as  to  which  there  was  no  statutory  bar;  nor  did 
Lord  Tenterden's  act  apply  to  the  mode  of  taking  *  such 
accounts  in  a  suit  in  chancery.  But  now  by  19  &  20 
Vict.  c.  97,  §  9,  merchants'  accounts  are  placed  on  the 
same  footing  as  other  accounts;  and  partnership  ac- 
counts, whether  they  are  or  are  not  merchants'  accounts, 
are  within  the  statute  of  limitations;  and  those  statutes 
are  a  bar  to  an  action  for  an  account  extending  to  a 
period  more  remote  than  six  years  before  the  com- 
mencement of  the  action,  unless  there  has  been  a  breach 
of  an  express  trust,  or  fraud,  or  payment,  or  an  ac- 
knowledgment, such  as  required  by  Lord  Tenterden's  act, 
or  unless  the  partnership  articles  are  under  seal.  So 
long,  indeed,  as  a  partnership  is  subsisting,  and  each 
partner  is  exercising  his  rights  and  enjoying  his  own 
property,  the  statute  of  limitations  has,  it  is  conceived, 
no  application  at  all;  but  as  soon  as  a  partnership  is 
dissolved,  or  there  is  any  exclusion  of  one  partner  by 
the  others,  the  case  is  very  different,  and  the  statute 
begins  to  run  (s).1     This  has  been  decided  by  the  House 

{p)  See  the  notes  to  Webber  v.  Tivill,  2  Wnis.  Sauud.  124  et 
seq.,  and  Catling  ?•.  Skoulding,  6  T.  K.  189. 

{q)  9  Geo.  4,  c.  14. 

(r)  Williams  v.  Griffiths,  2  Cr.  M.  &  R.  45;  Cottam  r.  Part- 
ridge, 4  Man.  &  Gr.  271;  Ashby  v.  James,  11  M.  &  W.  542;  Clark 
v.  Alexander,  8  Scott,  N.  R.  147;  Inglis  v.  Haigh,  8M.&W.  780. 
See,  too,  Jackson  v.  Ogg.  Johns.  397. 

(s)  Noyes  v.  Crawley,  10  Ch.  D.  31.  See  some  remarks  as  to 
the  effects  of  the  statute  between  partners  in  Winter  v.  Innes,  4 
M.  &  Cr.  Ill,  and  Way  v.  Bassett  5  Ha.  68. 


1  The  statute  in  Pennsylvania  contains  an  exception  in  favor 
of  merchants'  accounts;  but  in  McKelvy's  Appeal,  72  Pa.  St.  409 
(1872),  it  was  held  that,  as  between  partners  the  statute  begins 
to  run  from  the  time  of  the  dissolution  of  their  firm.  See.  also, 
Pierce  v.  McClellan,  93  111.  245  (1879);  Allen  v.  Woonsocket  Co., 
11  R.  I.  288  (1875);  McKaig  v.  Hebb,  42  Md.  227  (1874).  It 
docs  not  begin  to  run  till  dissolution;  Askew  v.  Springer,  111 
111.662(1885). 

In  Todd  v.  Rafferty,  30  N.  J.  Eq.  254  (1878);  Jordan  ?•.  Miller. 
75  Ya.  442  (1881);  Prentice  v.  Prentice,  72  Ga.  154  (1884);  Pat- 
terson v.  Lilly,  90  N.  Ca.  82  (1884),  and  other  cases,  it  has  been 
held  that  the  statute  does  not  begin  to  run  until  the  business  of 
the  partnership  has  been  settled  or  so  long  a  time  has  elapsed 
since  the  dissolution  that  a  settlement  has  been  presumed,  no 
assets  being  meantime  collected. 


DEFENCES  TO  ACTIONS  FOR  AN  ACCOUNT,  ETC.  583 

of  Lords  in  Knox  v.  Gye  (t),  in  which  a  surviving  part-  Bk.  III. 
ner  relied  on  the  statute  as  a  defence  to  a  suit  for  an  Chap.  10. 
account  instituted  by  the  executor  of  a  deceased  part- 


ner. The  deceased  partner  had  died  more  than  six  years  Knox  v.  Gye. 
before  the  filing  of  the  bill,  and  the  right  of  his  execu- 
tor had  never  been  recognized;  the  surviving  partner, 
however,  had  continued  the  partnership  business,  and 
had  got  in  outstanding  assets  within  six  years.  The 
V.-C.  Wood  held  that  the  statute  was  not  a  bar  to  the 
suit;  but  the  decision  was  reversed  by  Lord  Chelmsford 
on  appeal,  and  the  House  of  Lords  affirmed  Lord 
Chelmsford's  decision. 

In  a  still  more  recent  case  it  has  been  held  that  the  Noyes  v. 
statute  of  limitations  affords  a  good  defence  to  an  ac-  Crawley, 
tion  for  an  account  of  the  dealings  and  transactions  of 
a  partnership  *  which  has  been  dissolved  more  than  six  [  *  511] 
years  before  the  commencement  of  the  action  (u). 

With  reference  to  acknowledgments,  it  has  been  held  Effect  of 
in  a  partnership  case,  where  no  account  had  been  come  ackuowlea 
to  for  six  years,  that  a  signed  acknowledgment  of  a  lia- 
bility to  account  in  respect  of  matters  more  than  six 
years  old,  was  sufficient  to  justify  a  decree  for  an  ac- 
count in  respect  of  them,  although  the  acknowledgment 
did  not  contain  an  admission  that  anything  was  due, 
nor  any  express  promise  to  pay  what  might  be  found 
due  on  taking  the  account  (x).1 

Where  a  partnership  account  is  agreed   to  be  taken,  Payment  by 
and  a  receiver  is  appointed,  a  payment  made  by  the  re-  receiver  in  a 
ceiver  to  one  of  the  partners  on  account  of  a  debt  owing  sult- 
to  him  by  another  partner,  is  not  sufficient  to  prevent 
the  statute  from  being  a  bar  to  such  debt  (y). 

It  must  be  remembered  that  the  statute  of  limitations  cases  where 
does  not  apply  to  cases  of  express  trust  or  of  concealed  the  statute 
fraud.2     Therefore,  if  a  partner  has  died,   having   by  affords  no 
will  disposed  of  his  property  on  trust  for  payment  of 
his  debts,  this  is  sufficient  to  justify  a  decree  for  an  ac- 

(0  L.  R.  5  H.  L.  656.  See  19  &  20  Vict.  c.  97,  g  9.  Miller  v. 
Miller,  8  Eq.  499,  is  hardly  consistent  with  this,  unless  it  he  upon 
the  ground  that  there  was  no  dissolution,  or  that  there  was  a 
trust  deed  excluding  the  statute.  See  the  obs.  of  Malins,  V.-C, 
in  10  Ch.  D.  37. 

U)  Noyes  v.  Crawley,  10  Ch.  D.  31. 

(x)  See  Prance  v.  Synipson,  Kay,  678.  The  expression  was, 
"you  and  I  must  go  into  it  and  settle  the  account."  See,  also, 
Banner  v.  Berrid<z;e,  18  Ch.  D.  254  ;  Skeet  v.  Lindsay,  2  Ex.  D. 
314.     Compare  Mitchell's  claim,  6  Ch.  822. 

[y)  Whitley  v.  Lowe,  25  Beav.  421,  and  2  De  G.  &  J.  704. 

1  Shelmire's  Appeal.  70  Pa.  St.  281  (1871). 

2  Todd  v.  Rafferty,  30  N.  J.  Eq.  254  (1878). 


defence. 


5Si 


ACTIONS  BETWEEN  PARTNERS. 


Bk.  III. 

Chap.  10. 
Sect.  6. 


Stainton  v. 
Carrou  Com- 
pany. 


r*512] 


3.  Account 
stated. 


count  of  partnership  transactions  in  respect  of  which 
claims  existed  when  he  died,  although  more  than  six 
.  years  have  elapsed  since  that  time,  and  before  the  com- 
mencement of  the  action  (z).  Again,  in  cases  of  breach 
of  trust  and  of  fraud,  there  seems  to  be  no  limit  to  the 
time  at  which  a  court  will  interfere  and  afford  redress 
to  the  parties  aggrieved.  The  mere  lapse  of  thirty  or 
forty  years  since  the  right  first  accrued,  is  insufficient 
to  bar  the  remedy  in  such  cases. 

In  Stainton  v.  The  Carron  Company  (a),  the  man- 
agement of  the  affairs  of  a  company  was  entrusted  to 
a  person  who  was  entitled  to  one-sixth  of  the  shares  in 
it.  He  was  the  manager  of  the  company  from  1808 
until  1851,  when  he  died.  For  twenty-five  years  he 
rendered  ac30unts  regularly,  *  and  these  accounts  were 
never  questioned  during  his  life.  But  after  his  death, 
it  was  discovered  that  upwards  of  2000Z.  a  year  for 
many  years  had  not  been  properly  accounted  for  by 
him,  and  the  company  claimed  from  his  estate  nearly 
70,000Z.  in  respect  of  this  annual  deficiency,  and  as- 
serted a  lien  for  this  sum  on  his  shares  and  assets  in 
the  hands  of  the  company.  Notwithstanding  the  lapse 
of  time,  and  the  reception  without  dispute  of  the  ac- 
counts sent  in  by  the  manager  from  year  to  year,  a  de- 
cree was  made,  opening  the  whole  account  from  the 
year  1825  down  to  his  death  (6). 

3.  Account  stated. — To  an  action  for  an  account  of 
partnership  dealings  and  transactions,  an  account  there- 
of already  stated  and  settled  between  the  parties  (c) 
affords  a  good  defence  (d).1  No  precise  form  is  neces- 
sary to  constitute  a  stated  and  settled  account;  but  an 
account  stated,  unless  it  be  in  writing,  is  no  defence  to 
an  action  for  a  further   account.     It  is  not,  however, 

(z)  Ault  v.  Goodrich,  4  Russ.  434. 

(a)  24  Beav.  346. 

{b)  See.  too,  Allfrey  v.  Allfrev,  1  Mac.  &  G.  87  ;  Wedderburn 
v.  Wedderburn,  2  Keen,  722,  and  4  M.  &  Cr.  41. 

(c)  Of  course  the  maxim.  Res  inter  alios,  &c,  applies  to  settled 
accounts.  Carmichael  v.  Carmichael,  2  Ph.  101. 

{(1)  Taylor  v.  Shaw,  2  Sim.  &  Stu.  12  ;  Endo  ?■.  Caleham,  You. 
306.  An  account  settled  by  a  majority  was  held  binding  on  the 
minority  in  Robinson  v.  Thompson,  1  Vera.  465.  See,  too,  Stu- 
part  i".  Arrowsrnith,  3  Sm.  &  G.  176,  and  Kent  v.  Jackson,  2  De 
G.  M.  &  G.  49. 


1  Wood  v.  Gault,  2  Md.  Ch.  433  (1850) ;  Jessup  v.  Cook,  6  N. 
J.  L.  434  (1798)  :  Kidder  v.  Mcllhenney,  81  N.  Ca.  123  (1879)  ; 
Gage  v.  Parmelee,  87  111.  329  (1877).  The  representatives  of  a 
deceased  partner  are  bound  by  the  statement  of  accounts  made 
between  decedent  and  his  associates.  Groenendyke  v.  Coffeeu, 
109  111.  325  (1884). 


DEFENCES  TO  ACTIONS  FOR  AN  ACCOUNT,  ETC.  585 

necessary  that  the  account  should  be  signed  by  the  Bk.  III. 
parties,  if  it  can  be  shown  to  have  been  acquiesced  in  gjjfg    ' 

by  them  (e);  and  an  account  may  be  stated  and  set-         '    

tied,  although  a  few  doubtful  items  are  omitted  (/). 
It  is  to  be  observed,  that  tbe  fact  that  an  account  has 
already  been  rendered  by  the  defendant  to  the  plaintiff 
does  not  deprive  the  latter  of  his  right  to  have  the  same 
account  taken  under  the  direction  of  a  court  (g).x  to 
have  that  effect  an  account  must  not  only  have  been 
sent  in  to  the  plaintiff,  but  also  have  been  acquiesced 
in  by  him  (h).  It  is  further  to  be  observed,  that  al- 
though  the  *  principle  on  which  accounts  have  been  kept  L  ^l6\ 
may  have  been  acquiesced  in,  the  items  may  not  (i). 

A  settled  account  may  be  impeached  either  wholly  or  impeaching 
in  part  on  the  ground  of  fraud  or  mistake.     If  there  be  a  settled 
fraud,  or  if  any  mistake  affects  the  whole  account,  the  ^zJj^JJ 
whole  will  be  opened,  and  a  new    account  will  be  di-  0f  fraud  and 
rected  to  be  taken,  without  reference  to  that  which  has  mistake, 
been  stated  (k)f  but  if  there  be  no  fraud,  and  if  no 
mistake  affecting  the  whole  account  can  be  shown,  but 
the  correctness  of  some  of  the  items  in  it  is,  neverthe- 
less, disputed,  the  account  already  stated  will  not  be 
treated  as  non-existing,  but  will  be  acted  upon  as  cor- 
rect, save  so  far  as  the  party  dissatisfied  with  any  item 
can  show  it  to  be  erroneous  (I).    In  a  case  of  fraud,  an 
account  will  be  opened  in  toto,  even  after  the  lapse  of  a 
considerable  time  (m);3  but  if  no  fraud  be  proved,  an 

(e)  See  Hunter riT*Belcher,  2  De  G.  J.  &  Sin.  194  ;  Morris  v. 
Harrison,  Colles,  157  ;  Willis  v.  Jemegan,  2  Atk.  252.  See  on 
this  defence  in  general,  Beanies'  Pleas  in  Equity,  222.  and  Mit- 
ford.  302,  edit.  5.  A  verbal  account  and  a  receipt  in  full  is  not 
equivalent  to  a  stated  account.  Walker  v.  Consett,  Forrest,  157. 

(f)  Sim  v.  Sim,  11  Ir.  Ch.  310. 

(g)  See  Clements  v.  Bowes,  1  Drew.  692. 
('/()  Irvine  v.  Young,  1  Sim.  &  Stu.  333. 

(0  See  Mosse  v.  Salt,  32  Beav.  269  ;  Clancarty  v.  Latouche,  1 
Ball  &  Beatty,  420.     Compare  Hunter  v.  Belcher,  2  De  G.  J.  & 

(k)  Williamsons.  Barbour,  9Ch.  D.  529  ;  Gething  v.  KeigWey, 
ib.  547;  Clarke  v.  Tipping,  9  Beav.  2*4  :  Wharton  v.  May,  5 
Ves.  68  ;  Beaumont  v.  Boultbee,  ib.  485,  and  7  Ves.  599  ;  All- 
frey  v   Allfrey,  1  Mac.  &  G.  87  ;  Coleman  r.  Mellersh,  2  ib.  309. 

(/)  Holgatew.  Shutt,  27  Ch.  D.  Ill,  and  28  ib.  Ill  ;  Gething 
v.  Keighley,  9  ib.  547  ;  Pitt  v.  Cholmondeley,  2  Ves.  S.  565  ; 
Vernon  v.  Vawdry.  2  Atk.  119. 

(m)  Williamson  'v.  Barbour,  9  Ch.  D.  529;  Allfrey  v.  Allfrey, 

1  Rehill  v.  McTagns  (Pa.),  7  All.  Rep.  224  (1886)  ;  Schmidt  v. 
Lebhv,  11  Rich.  Eq.  3:29  (1860). 

-  Rehill  v.  McTague  (Pa.),  7  Atl.  Rep.  224  (1886);  Steadwell 
v.  Morris,  61  Ga.  97  (1887);  McLucas  v.  Durham,  20  S.  Ca.  302 
(1883). 

3Berkey  v.  Judd,  22  Minn.  287  (1875). 


586 


ACTIONS  BETWEEN  PARTNERS. 


Bk.  III. 
Chap.  10. 
Sect.  6. 


[*514] 


Mistakes  of 
law. 


Accounts 
stated  on  the 
death  of  a 
partner. 


account  which  has  been  long  settled  will  not  be  re- 
opened in  toto  ;  the  utmost  which  the  Court  will  then 
do  will  be  to  give  leave  to  surcharge  and  falsify  (n); 
and  there  are  cases  in  which,  in  consequence  of  lapse 
of  time,  the  Court  will  do  no  more  than  itself  rectify 
particular  items,  instead  of  giving  leave  to  surcharge  or 
falsify  generally  (o).  Moreover,  the  mere  fact  that 
items  are  treated  in  an  improper  way,  or  are  improperly 
omitted,  is  not  of  itself  sufficient  to  induce  the  Court 
to  open  a  settled  account  ;  for  if  the  items  in  question 
were  known  to  the  parties,  and  there  be  no  fraud  or  un- 
due influence  proved,  the  Court  will  infer  that  the 
partners  agreed  to  treat  the  items  as  they  in  fact  did 
treat  them  (p).  But  an  item  omitted  by  mutual  mis- 
take will  be  set  right  (q). 

*  If  a  settled  account  is  impeached  for  errors,  particu- 
lar errors  must  be  stated  and  proved  (r)  -,1  and  the  same 
rule  holds  where  the  account  is  settled,  "errors  ex- 
cepted" (s). 

In  surcharging  and  falsifying,  errors  of  law,  as  well 
as  errors  of  fact,  may  be  set  right  (t);  and  where  leave 
is  given  to  one  party  to  surcharge  and  falsify,  similar 
leave  is  also  accorded  to  his  opponent  (w).2 

On  the  retirement  or  death  of  a  partner,  it  is  usual 
for  an  account  to  be  stated  between  him  or  his  repre- 
sentatives on  the  hand,  and  the  continuing  partners  on 
the  other,  and  for  mutual  releases  to  be  given.      After - 

1  Mac.  &  G.  87  ;  Stainton  v.  The  Carron  Co.,  24  Beav.  346.  See 
Vernon  v.  Vawdry,  2  Atk.  119  ;  Beaumont  v.  Boultbee,  5  Ves. 
485. 

(n)  See  Gething  ts.  Keischley,  9  Ch.  D.  547  ;  Millar  v.  Craig.  6 
Beav.  433 ;  Brownell  v.  Brownell,  2  Bro.  C.  C.  61,  and  1  Mac.  & 
G.  94. 

(o)  See  Twogood  v.  Swanston,  6  Ves.  485  ;  Mound  v.  Allies,  5 
Jur.  860. 

{p)  See  Maund  v.  Allies,  5  Jur.  860,  L.  C. ;  Laingw.  Campbell, 
36  Beav.  3,  where  bad  debts  were  treated  as  good. 

(q)  Pritt  v.  Clay,  6  Beav.  503. 

(r)  Parkinson  r.  Hanburv,  L.  R.  2  H.  L.  1  ;  Dawson  v.  Daw- 
son, 1  Atk.  1  ;  Taylor  v.  Haylin,  2  Bro.  C.  C.  310  ;  Kinsman  v. 
Barker,  14  Ves.  579.     See  Whyte  v.  Ahrens,  26  Ch.  D.  717. 

(s)  Johnston  v.  Curtis,  2  Bro.  C.  C.  311,  note. 

(t)  Roberts  v.  Kuffiu,  2  Atk.  112;  and  see  Daniel  v.  Sinclair, 
6  App.  Ca.  181. 

(it)  1  Madd  Ch.  144,  where  it  is  said  to  have  been  so  held  by 
V.-C.  Leach  in  Anon.,  6  March,  1821. 


Harrison  v.  Dewey,  46  Mich.  173  (1881);  Augsburyfl.  Flower, 
68  N.  Y.  619  (1877);  Loesser  v.  Loesser,  81  Ky.  139  (1879); 
Burkett  v.  Hird,  55  Wis.  650(1882). 

2  If  an  account  is  opened  for  one  partner  it  is  opened  for  all 
if  justice  require  it.  Bailey  v.  Moore,  25  111.  347  (1861);  Leon- 
ard v.  Leonard,  1  W.  &  S.  342  (1841). 


DEFENCES  TO  ACTIONS  FOR  AX  ACCOUNT,  ETC.  587 

wards  attempts  are  occasionally  made  to  open  accounts  Bk.  III. 
thus  stated,  and  to  set  aside  the  releases,  and  to  have  £liatp'fi10' 

a  new  account  taken,  and  a  fresh  settlement  of  the  part-        " ! 

nership  affairs.  In  such  cases  as  these,  before  the  settled 
accounts  can  be  opened,  the  release  must  be  set 
aside  (as).  Whether  this  can  be  done  or  not,  depends 
upon  circumstances  which  will  be  found  discussed  un- 
der the  title  rescission  of  contract  (y). 

In  taking  accounts  under  an  ordinary  judgment,  set- 
tled accounts  are  never  disturbed  unless  specially 
directed  so  to  be  (z). 

4.  Award. — Another  defence  to  an  action  for  an  ac-  4.  Award, 
count   is,  that  the  matters  in   difference  between  the 
partners  have  been  settled  by  arbitration. 

A  mere  agreement  that  the  matters  in  question  should  Agreements 
be  referred,  has  frequently  been  held  to  be  no  defence  to  r.eter  .to 
to  an  action  in  respect  of  them   (a).1     But    if    those 
matters  have  actually  been  disposed  of  by  the  award  of 
an    arbitrator,  they  cannot    afterwards    be    made   the 
foundation   of  any    action    between  *  the    parties   on  [  *  515] 
whom  the  award  is  binding  (b).     But  an  award  will  Award. 
not  avail  as  a  defence  to  the  action  if  the  account  sought 
by  it  is  different  from  that  to  which    the    award  ap- 
plies (c).     So  an  award  on  a  reference  of  all  matters 
in  difference  is  no  defence  to  an  action  for  an  account 
of  monies  received  after  the  making  of  the  award,  and 
not  dealt  with  by  it,  owing  to  a  mistake  on  the  part  of 
the  arbitrator.      Thus,  in  Spencer  v.  Spencer  (d),  the  Spencer  v. 
partners  on  a  dissolution  referred  all  matters  in  differ-  bPencer- 
ence  to  arbitration.     The  arbitrator   awarded  that  one 
of  the  partners  should  get  in    the  outstanding  debts, 
which  were  estimated    by  the  arbitrator  at  a  certain 
amount.     The    award  was   acted  on,  but  it  appeared 
that  the  debts  ultimately  got  in  amounted  to  more  than 
the  sum  at  which  they  had  been  estimated.     One  of  the 
partners  claimed  a  share  of  the  difference  between  the 

{x)  See  Millar  v.  Craig,  6  Beav.  433  ;  Fowler  v.  Wyatt,  24 
Beav.  232  ;  and  see  Parker  v.  Bloxharn,  20  Beav.  295. 

(y)  Ante,  p.  482,  et  seq. 

(z)  See  Holgate  0.  Shutt,  27  Ch.  D.  Ill,and28ib.  Ill  ;  Xewen 
r.  Wetten,  31  Beav.  315.  But  see  Millord  v.  Milford,  McCl.  & 
Y.  150. 

(a)  Thompson  v.  Charnock,  8  T.  R.  139  ;  Michell  v.  Harris,  4 
Bro.  C.  C.  312.     Sec  ante,  p.  451  et  seq. 

(b)  Tittenson  r.  Peat,  3  Atk.  529;  Kouth"  v.  Peach,  2  Anst. 
519,  and  3  ib.  637. 

(c)  As  in  Farrington  v.  Chute,  1  Vern.  72. 

(d)  2  Y.  &  J.  249. 

.      >  Page  v.  Marshall,  G  Phila.  264  (1867). 


588 


ACTIONS  BETWEEN  PAKTNERS. 


Bk.  III. 
Chap.  10. 
'Sect.  6. 


5.  Payment. 


Accord  and 
satisfaction. 


[  *  516] 

Brown  v. 
Perkins. 


Waiver. 


6.  Release. 


estimated  and  the  actual  amount  of  these  debts,  and  as 
it  was  plain  that  the  award  had  proceeded  on  a  mis- 
take, an  account  was  directed,  notwithstanding  all  mat- 
ters in  difference  had  been  referred. 

"With  respect  to  agreements  to  refer,  an  important 
enactment  is  contained  in  the  Common  law  procedure 
act,  1854,  §  11,  as  has  been  already  pointed  out  (e). 

5.  Payment,  and  accord  and  satisfaction. — Payment, 
per  se,  is  not  a  defence  to  an  action  for  an  account  ;  for 
the  subject  of  such  an  action  is  to  ascertain  how  much 
is  or  was  payable.  But  payment  of  a  sum  of  money 
and  acceptance  of  it  iu  lieu  of  all  demands,  is  equiva- 
lent to  accord  and  satisfaction,  which  is  as  much  a  de- 
fence to  an  action  for  an  account  as  is  a  release  (/  ). 

With  respect  to  accord  and  satisfaction,  it  is  to  be 
observed  that  there  must  be  no  uncertainty  in  the  agree- 
ment relied  on  as  an  answer  to  the  action  for  an  ac- 
count, and  that  it  must  be  shown  that  such  agreement 
has  been  performed  ;  for  in  the  performance  lies  the 
satisfaction  (g).  On  these  grounds  the  *  late  Yice- 
Chancellor  Wigram,  in  a  suit  for  an  account  by  the  ex- 
ecutors of  a  deceased  partner  against  the  surviving 
partner,  overruled  the  plea  that  it  was  agreed  between 
the  defendant  and  the  deceased  that  all  accounts  be- 
tween them,  and  all  claims  of  the  deceased  in  respect 
of  the  partnership,  should  be  waived  ;  and  that  in  con- 
sideration thereof  the  deceased  should  be  permitted  to 
carry  on  business  alone,  without  any  further  question 
or  dispute  by  the  defendant,  which  the  deceased  ac- 
cordingly did  (h).  However,  if  an  agreement  to  waive 
all  accounts  is  entered  into,  and  is  founded  on  a  suffi- 
cient consideration,  and  is  free  from  all  taint  or  fraud 
and  undue  influence,  the  parties  to  it  will  be  precluded 
from  suing  each  other  in  respect  of  the  accounts  so 
agreed  to  be  waived  (i). 

6.  Release. — A  release  is  a  good  defence  to  an  action 
for  an  account  (k).  But  where  the  release  has  been 
executed  on  the  faith  of  the  correctness  of  certain  ac- 
counts, which  are  afterwards  ascertained  to  be  incor- 
rect, the  release  will  be  set  aside,  and   a  fresh  account 


[e)  Ante.  p.  452. 

(/)  See  Bac.  Ab.  Accompt.  E;  Vin.  Ab.  Account  X.;  Brown  v. 
Perkins,  1  Ha.  564.     But  see  Com.  Dig.  Accompt.  E.  6, pi.  8. 

((/)  Com.  Dig.  Accord  (B.  3)  and  (B.  4). 

(h)  Brown  v.   Perkins,  1  Ha.  564. 

(/)  See  Sewell  v.  Bridge.  1  Ves.  Sen.  297.  Compare  the  last 
case. 

(jfc)  See  Mitford,  PI.  304.  ed.  5.  As  to  form  of  plea,  see  Brooks 
v.  Sutton,  5  Eq.  361. 


JUDGMENT  FOE  ACCOUNT.  589 

will  be  ordered  (I),  unless  the  parties  clearly  intended  Bk.  III. 
to  abide  by  the  accounts,  whether  correct  or  not.      A  Chap.  10. 
release,  moreover,  can,  of  course,  be  set  aside  for  fraud.    ec  '    ' 
A  release,  to  be  effectual  as  such,  must  be  under  seal. 
A  release  not  under  seal  is  regarded  as  a   stated  ac- 
count (m).1 

(c)  Of  judgments  for  a  partnership  accouut. 

A  judgment  for  a  partnership  account  in  its  simplest  Judgments 
form  is  to  this  effect :  "Let  an  account  be  taken  of  the  for  account* 
partnership  dealings  and  transactions  between  the  plain- 
tiff and  the  defendant  from  .     And  let  what  upon 

taking  the  said  account  shall  be  certified  to  be  due  from 
either  of  the  said  parties  to  the  other  of  them,  be  paid 
by  the  party  from  whom  to  the*  party  to  whom  the  [  *  517] 
same   shall    be   certified   to   be   due.     Liberty  to  ap- 
ply"  (n).2 

(l)  See,  for  example,  Pritt  v.  Clay,  6  Beav.  503  ;  Wedderburn 
r.  Wedderburn,  2  Keen,  722,  and  4  M.  &  Cr.  41  ;  Millar  v.  Craig, 
6  Beav.  433,  and  see  Phelps  v.  Sproule,  1  M.  &  K.  231,  and  see 
ante,  account  stated,  p.  512. 

(m)  Mitf.  PI.  307,  ed.  5.  See,  as  to  agreements  to  waive  ac- 
counts, ante,  notes  (A)  and  (i). 

(n)  Seton  on  Decrees,  1197,  ed.  4,  where  several  other  useful 
forms  will  be  found  given  and  referred  to.  The  reports  of  the 
following  cases  also  contain  useful  precedents: — Binney  v.  Mutrie, 
12  App.  Ca.  165  ;  Benningfield  v.  Baxter,  ib.  181,  as  to  tbe  ap- 
plication of  surplus  assets  ;  Travis  v.  Milne,  9  Ha.  157.  decree 
against  executors  of  a  deceased  partner  who  had  traded  with  his 
assets  ;  Whetham  v.  Davey,  30  Ch.  D.  580,  account  at  instance 
of  a  mortgagee  of  a  partner's  share  ;  Devaynes  v.  Noble.  1  Mer. 
•">:;n.  account  where  one  firm  succeeded  another  ;  Wedderburn  r. 
Wedderburn,  2  Keen,  752,  account  where  one  firm  succeeded  an- 
other, and  the  capital  of  a  deceased  partner  was  continued  in 
trade  ;  Cook  v.  Collingridge,  Jac.  623,  and  more  fully  in  27 
Beav.  456,  note,  sale  of  a  testator's  share  set  aside  and  account 
of  subsequent  profits  and  good-will  ;  Crawshay  v.  Collins,  15 
Ves.  230,  and  2  Russ.  347,  account  of  subsequent  profits  ;  Millar 
v.  Craig.  6  Beav.  442,  setting  aside  a  release  and  opening  ac- 
counts ;  Fereday  v.  Wightwick,  Taml.  262,  declaration  that  prop- 
erty acquired  by  one  partner  was  partnership  property,  and 
an  account  accordingly  ;  Wilson  v.  Greenwood,  1  Swanst.  483, 
sale,  receiver,  and  account  ;  Blisset  v.  Daniel,  10  Ha.  538,  de- 
cree restoring  a  partner  wrongfully  expelled  ;  England  v.  Cur- 
ling, 8  Beav.  140,  specific  performance  of  agreement  for  a  part- 
nership ;  Pillans  v.  Harkness,  Colles,  442,  decree  relieving  a 
person  who  had  been  induced  to  become  a  partner  by  fraudulent 
representations  ;  Evans  v.  Coventry,  8  De  G.  M.  &  G.  835,  wind- 
ing up  insurance  society,  accouut  against  directors  for  breaches 
of  trust. 


1  The  fact  that  an  action  is  pending  which  has  as  its  object  an 
accounting,  is  a  bar  to  another  action  brought  for  the  same  pur- 
pose.    Clarke's  Appeal,  107  Pa.  St.  436  (1884). 

'-'  Before  decreeing  an  account  it  is  the  duty  of  the  Court  to  de- 


590 


ACTIONS  BETWEEN  PARTNERS. 


Bk.  IH. 
Chap.  10. 
Sect,  6. 


Costs. 


[*518] 


Mode  of 
taking 
the 
accounts. 


la  actions  for  an  account  of  partnership  dealings 
and  transactions,  the  ordinary  rule  formerly  was  to 
give  no  costs  up  to  the  decree  directing  the  account  ; 
nor  was  this  rule  departed  from  except  in  cases  of  gross 
misconduct  on  the  part  of  the  defendants  (o).1  But 
lately  the  rule  has  been  to  pay  the  costs  of  an  action 
for  dissolution  from  the  commencement  out  of  the  part- 
nership assets  unless  there  is  some  good  reason  to  the 
contrary  (p).  But  where  the  action  is  really  instituted 
to  try  some  disputed  right,  the  unsuccessful  litigant 
will  be  ordered  to  pay  the  costs  up  to  the  trial  of  the 
action  (q).  The  costs  of  taking  the  accounts,  &c, 
directed  at  the  hearing  are,  although  disputed,  usually 
defrayed  out  of  the  partnership  assets,  and,  *  if  necessary 
by  a  contribution  between  the  partners  (r).2  But  the 
partnership  debts  and  liabilities  including  sums  du3  from 
the  firm  to  the  partners  in  respect  of  advances  or  the  like 
must  be  paid  out  of  the  assets  in  priority  to  the  costs  (s). 

The  method  of  taking  a  partnership  account  under  a 
judgment  in  the  usual  form  is  as  follows  : — 3 

(o)  See  Hawkins  v.  Parsons,  8  Jur.  N.  S.  452  ;  Parsons  v.  Hay- 
ward,  4  De  G.  F.  &  J.  474. 

(p)  Hauler  v.  Giles,  11  Ch.  D.  942,  and  see  note  (.<-),  infra. 

(q)  Hamer  v.  Giles,  11  Ch.  D.  942;  Warner  v.  Smith,  9  Jur. 
N.  S.  169.  See,  also,  Norton  v.  Eussel,  19  Eq.  343,  where  a 
surviving  partner  refused  an  account  to  the  executor  of  his  de- 
ceased co-partner.  See,'  as  to  mutual  companies,  Harvey  v. 
Beckwith,  10  Jur.  N.  S.  577. 

(r)  See  the  next  note,  and  Butcher  v.  Pooler,  24  Ch.  D.  273. 
This  rule  was  followed  as  to  the  whole  costs  where  the  action 
was  referred  under  \  11  of  the  Com.  Law  Proc.  Act,  1854  ; 
Newton  v.  Taylor,  19  Eq.  14. 

(s)  Austin  v.  Jackson,  11  Ch.  D.  942.  note  ;  Hamer  v.  Giles, 
ib.  942  ;  Potter  v.  Jackson,  13  ib.  845. 

termine  all  preliminary  questions,  such  as  arise  where  the  Stat- 
ute of  Limitati  >ns  is  pleaded  or  a  release  or  the  former  statement 
of  an  account.  Dampf.'s  App.,  106  Pa.  St.  72  (1884).  Auld  v. 
Butcher,  2  Kans.  135  (1863).  And  the  Court  may  direct  the 
framing  of  an  issue  in  order  to  try  before  a  jury  the  question  of 
whether  or  not  the  alleged  partnership  existed  and,  if  so.  what 
exactly  were  its  terms.  Carl  in  v.  Donegan,  15  Kans.  495  (1875); 
Setzer?\  Beale,  19  W.  Va.  274  (1882;;  French  v.  Wall,  2  Texas 
288  (1847). 

1  In  Stevens  v.  Yeatman,  19  Md.  480  (1862),  it  was  said  that 
the  question  of  whose  conduct  caused  the  discord  that  led  to 
the  taking  of  the  account  has  nothing  to  do  with  the  adjustment 
of  the  costs.  Costs  are  within  the  discretion  of  the  court  and 
are  to  be  apportioned  according  to  the  equities  of  each  case. 
Gyger's  Appeal,  62  Pa.  St.  73  (1869):  Gilman  v.  Vaughan  44 
Wis.  646  (1878). 

2  Pratt  v.  McHatton,  11  La.  Ann.  260  (1856);  Campbell  v. 
Coquard.  16  Mo.  App.  552  (1885). 

3  In  order  to  enable  him  properly  to  state  the  account,  the 


JUDGMENT  FOR  ACCOUNT.  591 

1.  Ascertain  how  the  firm   stands  as   regards  non-  Bk.  III. 
partners.  Chap.  10. 

2.  Ascertain  what  each  partner  is  entitled  to  charge  ' ~ec  '    ' 
in  account  with  his  co-partners  ;  remembering,  in  the 
words  of  Lord  Hardwicke,  that  "each  is  entitled  to  be 
allowed  as   against   the   other,  everything  he   has   ad- 
vanced or  brought  in  as  a  partnership  -transaction,  and 

to  charge  the  other  in  the  account  with  what  that  other 
has  not  brought  in,  or  has  taken  out  more  than  he 
ought  (t). 

3.  Apportion  between  the  partners  all  profits  to  be 
divided  or  losses  to  be  made  good  ;  and  ascertain  what, 
if  anything,  each  partner  must  pay  to  the  others,  in 
order  that  all  cross  claims  may  be  settled. 

In  order,  therefore,  to  take  a  partnership  account,  it  Matters 
is  necessary  to  distinguish   joint  estate   from   separate  involved  in 
estate  ;  joint  debts   from   separate  debts  ;  and   to  de-  taken  the 
termine  what  gains  and  what  losses  are  to  be  placed  to  account- 
the  joint  account  of  all  the  partners,  or  to  the  separate 
accounts  of  some  one  of   them  exclusively.      The  prin- 
ciples  upon   which   this   is  to   be   done  have  been  ex- 
plained in   previous   chapters.      Referring   the  reader, 
therefore,  to  them,  and  reminding  him  that,  in  taking 
accounts  between  partners,  attention  must  be  paid,  not 
only  to  the  terms  of  the   partnership  articles,  but  also 
to  the  manner  in  which  they  have  been  acted  on  by 
the  partners  (u),  there  *  remains  but  little  to   add  on  [  *  519] 
the  present  subject,  except  as  regards  just  allowances, 
the  period  over  which  the  account  is  to  extend,  and  the 
evidence  upon  which  it  is  to  be  taken. 

With  respect  to  just  allowances. 

Just  allowances  are  made,  although  the  judgment  is  Just  allow- 
silent  as  to  them  (x);  and  when  a  partnership  account  ances. 
is  ordered,  it  is  not  usual  for  the  Court  to  determine  be- 

(0  West  v.  Skip,  1  Ves.  S.  242.  The  rule  in  Clayton's  case, 
respecting  the  appropriation  of  payments  applies  to  partners 
inter  se  as  well  as  to  other  persons.  See  Toulrnin  v.  Copland.  3 
Y.  &  C.  Ex.  625,  and  7  CI.  &  Fin.  350. 

(u)  See  ante,  pp.  408,  432,  and  Watney  v.  Wells.  2  Ch.  250.  It 
is  said  a  partner  is  not  to  be  charged  as  such  with  what  he  might 
have  received,  without  his  wilful  default,  Rowe  v.  Wood,  2  J."  & 
W.  556,  but  quaere  whether  a  surviving  partner  could  not  be 
made  so  to  account,  as  he  alone  can  get  in  the  assets  of  the  hrni. 
See,  also,  Bnry  v.  Allen,  1  Coll.  604. 

(x)  See  Ord.  xxxiii.  r.  8. 

master  to  whom  the  matter  is  referred  ought  to  examine  into  the 
terms  of  the  partnership.  Jones  v.  Jones.  1  Ired.  Eq.  332  (1841); 
and  the  extent  and  duration  of  the  firm  business,  Lannan  v. 
Clavin,  3  Kans.  17  (1864). 


592 


ACTIONS  BETWEEN  PARTNERS. 


Bk.  III. 
Chap.  10. 
Sect.  6. 


1.  Time  from 
which  the 
account  is  to 
be  taken. 


[  *  520] 


Dealings 
anterior  to 
commence- 
ment of 
partnershiq. 


forehand  what  are,  and  what  are  not,  just  allowances. 
That  is  determined  on  taking  the  account;  and,  if 
necessary,  the  order  will  direct  the  chief  clerk  to  state 
the  facts  and  reasons  upon  which  he  shall  adjudge  any 
allowances  to  be  just  allowances  (y).  What  ought  to 
be  so  allowed  must  be  determined  by  the  articles  of 
partnership,  and  by  the  principles  discussed  in  a  pre- 
ceding chapter  (z). 

With  respect  to  the  period  over  which  an  account  is  to  extend. 

This  can  only  be  determined  by  ascertaining  (1)  the 
time  from  which  it  is  to  begin,  and  (2)  the  time  at 
which  it  is  to  cease. 

The  time  from  which  the  account  is  to  begin,  will,  in 
a  general  account  of  partnership  dealings  and  transac- 
tions, be  the  commencement  of  the  partnership,  unless 
some  account  has  since  that  time  been  settled  by  the 
partners,  in  which  case  the  last  settled  account  will  be 
the  point  of  departure  (a).  If  there  has  b^  en  an  ac- 
count settled  so  as  to  be  binding  on  the  parties,  such 
account  will  not  be  re-opened  (6).  This  used  to  be 
provided  for  in  the  decree  by  the  insertion  of  the  clause, 
"And  if,  in  taking  the  said  account,  it  shall  appear  that 
any  *  account  has  been  settled  and  agreed  upon  between 
the  parties  up  to  any  given  time,  the  same  is  not  to  be 
disturbed  (c).  It  is  not,  however,  now  usual  to  insert 
these  words,  it  not  being  the  practice  to  disturb  settled 
accounts,  unless  there  is  some  special  direction  to  that 
effect  (d). 

"Where  partners  have  had  dealings  together  prepara- 
tory to  the  commencement  of  their  partnership,  these 
dealings  cannot  be  excluded  from  consideration  in  tak- 
ing the  partnership  accounts.  As  observed  by  Lord 
Langdale  in  Cruikshank  v.  Mc Vicar  (e): 


(y)  See  Crawshay  r.  Collins,  2  Russ.  347;  Brown  w.  De  Tastet, 
Jac.  294,  298,  and  299;  Cook  v.  Collingridge,  Jac.  623,  625;  AVed- 
derburn  v.  Wedderburn,  2  Keen,  753. 

(z)  Ante,  p.  380  et  scq. 

(a)  See  Cook  v.  Collingridge,  Jac.  624;  Beak  r.  Beak,  Rep. 
Temp.  Finch.  190.  An  incoming  partner  has  no  right  to  profits 
made  before  he  became  a  partner,  unless  there  is  an  agreement  to 
that  effect.  Gordon  v.  Rutherford,  T.  &  R.  373.  See,  as  to  the 
Statute  of  Limitations,  ante,  p.  508  et  seq. 

(b)  See  ante,  p.  512. 

(c)  Seton,  276,  ed.  2. 

(d)  See  Holgate  v.  Shutt.  27  Ch.  D.  Ill,  and  28  ib.  111,-Newen 
v.  Wetten,  31  Beav.  315.  Compare  Milford  v.  Milford,  MacCl.  & 
Y.  150. 

(e)  8  Beav.  116. 


ACCOUNT — PROFITS  SINCE  DISSOLUTION.  593 

' '  Some  things  must  be  clone  by  way  of  preparation  for  or  intro-  Bk.  III. 
ductionto  the  real  transactions  of  the  partnership  business.   Again,  Chap.  10. 
when  the  partnership  business  is,  in  one  sense,  at  an  end,  still         '     


you  have  not  therefore  put  an  end  to  the  joint  transactions;  they 
must  necessarily  be  carried  on  for  the  purpose  of  winding  up  the 
concern  and  everything  belonging  to  it.  So  that  when  you  speak 
of  partnership  dealings  and  transactions  you  are  not  to  exclude 
from  your  consideration  those  transactions  and  matters  which  are 
necessary  by  way  of  introduction  or  preparation  for  a  partner- 
ship dealing,  nor  are  you  to  exclude  those  which  afterwards  fol- 
low for  the  purpose  of  winding  up  the  concerns  of  the  partner- 
ship." 

The  time  at  which  an  account  of  partnership  dealings  2.  Time  up  to 
and  transactions  is  to  stop  will,  naturally,  be  the  date  which  the 
of  the  dissolution  of  the  firm  (/).      Not  that  no  ac-  account  is  to 
count  is  to  be  taken  of  what  occurs  after  that  date;  for 
some  time  or  other  must  elapse  between  the  dissolution 
and  the  final  winding  up  of  the  affairs  of  the  concern, 
and  such  time  cannot  in  fairness  to  any  one  be  excluded 
from  consideration  (g).     Notwithstanding  dissolution,  a 
partnership  is  deemed  to  continue   so  far  as  may  be 
necessary  for  the  winding  up  of  its  affairs  (h);  and  an 
account  of  partnership  dealings   and   transactions,  al- 
though in  one  sense  it  stops  at  the  date  at  which  the 
partnership  is  dissolved,  must  still  be  kept  open  for  the 
purpose  of  debiting  and  crediting  the  proper   *  parties  [  *521] 
with  the  monies  payable  by  or  to  them  in  respect  of 
fresh  transactions  incidental  to  the  winding  up,  as  well 
as  in  respect  of  old  transactions  engaged  in  prior  to  the 
dissolution  (i). 

Moreover,  upon  the  retirement,  bankruptcy  or  death  Subsequent 
of  a  partner,  it  often  happens  that  the  continuing  or  profits  when 
surviving  partner  carries  on  the  partnership  business  a  c,.ea  , or 
without  coming  to  any  settlement  of  the  partnership  ner>s  capital 
accounts,  and  without  paying  oat  the  share  of  the  late  has  been 
partner.     When  this  is  done,  questions  of  great  diffi-  left  iu  The 
culty  arise  which  it  is  now  proposed  to  investigate.         concern. 

(/)  See,  accordingly,  Beak  v.  Beak,  Finch,  191,  a  case  of  dis- 
solution by  death;  Jones  v.  Noy,  2  M.  &  K.  125,  a  case  of  disso- 
lution by  decree  on  the  ground  of  lunacy. 

('/)  See  per  Lord  Eldon  in  Crawshay  v.  Collins,  2  Russ,  345; 
Haie  v.  Hale,  4  Beav.  375. 

(//)  See,  as  to  this,  ante,  p.  217  ct  acq. 

</)  See  Willet  v.  Blanford,  1  Ha.  270;  and  as  to  the  difference 
between  the  accounts  before  and  after  the  date  of  dissolution,  see 
Watney  v.  Wells,  2  Ch.  250.  See,  also,  Booth  v.  Parks,  1  Moll. 
465,  and  ante,  pp.  402,  420. 

*  15   LAW   OF   PARTNERSHIP. 


594 


ACTIONS  BETWEEN  PARTNERS. 


Bk.  III. 

Chap.  10. 
Sect.  6. 

General 
principles. 


1.  Where 
capital  is 
lent  at 
interest. 


[  *  522] 


2.  Where 

capital  is 
"wrongfully 
employed  in 
trade  by 
persons  who 
are  not  trus- 
tees. 


Account  of  profits  subsequent  to  dissolution. 

Before  adverting  to  the  decisions  which  define  and 
illustrate  the  right  of  a  late  partner,  or  of  his  represen- 
tatives, to  an  account  of  the  profits  made  by  his  contin- 
uing or  surviving  partners  by  the  use  of  his  capital  in 
their  business,  it  will  be  useful  to  consider  the  princi- 
ples applicable  to  a  more  abstract  question,  which  may 
be  put  thus — If  a  person  trades  with  property  which 
does  not  belong  to  him,  what  are  the  rights  of  the 
owner  against  him  in  respect  of  the  profit  he  has  made? 

First,  let  us  suppose  that  the  property  is  used  in 
trade  by  agreement  with  the  owner:  then  the  agree- 
ment will  regulate  the  rights  of  the  owner.  Conse- 
quently, if  a  partner  agrees  that  when  he  dies  or  re- 
tires his  capital  shall  remain  in  the  business  at  inter- 
est, those  who  carry  on  that  business  will  be  accounta- 
ble for  the  capital  and  interest,  and  nothing  more  (k). 
Further,  if  executors  or  trustees  lend  trust  money  to  a 
stranger  at  interest,  the  obligation  of  the  borrower  is 
limited  to  repayment  of  the  money  lent  with  interest; 
and  it  is  immaterial  whether  he  has  employed  the 
money  in  trade  or  not,  and  whether  the  money  was  lent 
to  him  properly  or  improperly  (I).  *  But  a  loan  by  A. 
to  B.  must,  not  be  confounded  with  capital  brought  by 
A.  into  a  firm  of  A.  and  B.  (m). 

Next,  let  us  suppose  that  the  property  is  wrongfully 
used  in  trade, without  any  agreement  express  or  tacit  with 
the  owner;  and  let  us  suppose  that  there  is  no  trust  be- 
tween the  trader  and  the  owner.  The  trader's  liability 
in  this  case  will  be  to  restore  the  property,  and  to  make 
to  the  owner  proper  compensation  for  its  detention. 
But  what  is  proper  compensation  ?  Is  it  interest,  or 
the  profits  made  by  the  trader  by  the  use  of  the  prop- 
erty in  question  ?  or  the  profits  which  the  owner  would 
(probably)  have  made  if  he  had  had  the  property  it- 
self? The  profits  which  the  owner  might  have  made 
can  only  be  guessed  at,  and  this  is  a  sufficient  reason 
for  rejecting  these  profits  as  a  measure  of  compensa- 
tion. On  the  other  hand,  to  limit  the  compensation  to 
interest  (at  the  accustomed  rate)  would  frequently  en- 
able the  wrongdoer  to  profit  by  his  own  wrong,  and  be 
an   inadequate  compensation   to  the  owner.     It  may, 

(k)  Vyse  v.  Foster,  L.  R.  7  H.  L.  318,  and  8  Ch.  309,  where 
one  of  the  surviving  partners  was  an  executor  of  the  deceased. 

(/)  See  Stroud  v.  Gwyer,  28  Beav.  130,  approved  in  Vyse  v. 
Foster,  8  Ch.  309,  infra,  p.  534. 

(m)  See  Travis  v.  Milne,  9  Ha.  141,  and  Flockton  v.  Bunning, 
8  Ch.  323,  note,  infra,  p.  530. 


ACCOUNT — PROFITS  SINCE  DISSOLUTION.  595 

therefore,  be  necessary  to  give  the  owner  the  profits  Bk.  Ill 
made  by  the  trader  by  the  use  of  the  property  in  ques-  g^1^    " 

tion,  after  making  the  trader   all  just  allowances  in- _J 

eluding  a  fair  remuneration  for  his  trouble.  To  do  so 
may  moreover  be  justified  upon  the  ground  that  the 
profits  are  accretions  to  the  property  which  has  yielded 
them,  and  ought  to  belong  to  the  owner  of  such  prop- 
erty, in  accordance  with  the  maxim,  accessoriwn  sequi- 
tur  suum  principale  (n).  At  the  same  time  it  may  not 
be  always  right  to  restrict  the  owner's  compensation  to 
the  profits  made  by  the  use  of  his  property;  for  it  may 
happen  that  it  has  made  no  profit,  or  less  profit  than 
interest  at  the  current  rate  (o).  Compensation  to  the 
owner  being  the  object  in  view,  it  would  be  only  fair  to 
give  him  the  option  to  take  interest  or  the  profits  made 
by  the  use  of  his  property  (p). 

Now  let  us  suppose  that  the  trader  is  a  trustee  of  the  3.  "Where 
property,  *  and  that  he  employs  it  in  trade  contrary  to  [  *  523  | 
his  trust.     The  reasons  for  charging  him  with  interest,  "^^JJ, 
or  the  profits  made  by  the  property,  at  the  option  of  its  employed' iu 
owner,  are  as  applicable  to  this  case  as  to  that  last  in-  trade  by  a 
vestigated;  but  there  is  in  this  case  an  additional  rea-  trustee. 
son  for  so  charging   him,  for  it  is  a  well-established 
rule  that  no  trustee  shall  himself  derive  profit  from  the 
use  of  the  trust  property  (q). 

There  remains  for  consideration  the  mixed  and  diffi-  4.  Mixed 
cult  case  in  which  a  trustee  has  improperly  employed  c^ses~^°n" 
the  trust  property  in  a  trade  carried  on  by  himself  in  ^^g™ 
partnership  with  others  who  are  not  trustees.     The  lia-  a  Liability 
bility  of  the  trustee  in  this  case  to  be  charged  (at  the  0f  the  trustee 
option  of  the  cestui  que  trust)  with  interest  or  with  the  sharing 
profits  which  he  (the  trustee)  has  derived  from  the   use  profits. 
of  the  trust  property   is  well   established  (r) ;'  but  it 
has  sometimes  been   considered  that  he  ought  to  be 
charged  with  all  the  profits  made  by  the  firm  by  means 

(n)  See  Yates  v.  Finn,  13  Ch.  D.  839;  Sir  Sam.  Eomilly's  ar- 
gument in  15  Ves.  224;  Sir  T.  Plumer  in  1  Jae.  &  W.  132  and 
133.  See,  also,  per  Boniilly,  M.  R.,  in  15  Beav.  392,  and  22 
Beav.  100. 

(o)  As  in  Booth  v.  Parkes,  Beatty,  444. 

{}))  See  ace.  infra,  p.  528;  hut  he  cannot  have  both,  see  Heath- 
cote  v.  Hulme,  1  Jac.  &  W.  122. 

(q)  See,  as  to  the  liability  of  the  trustee,  Docker  v.  Somes,  2 
M.  &  K.  655. 

(r)  See  Jones  v.  Foxall,  15  Beav.  388,  where  the  trustee  was 
charged  with  compound  interest  at  5  per  cent.  See  Lord^Sel- 
borne's  observations  on  this  case  in  Vyse  v.  Foster,  L.  E.  7  H. 
L.  346.  ^__ 

1  Sequin's  Appeal,  103  Pa.  St.   139  (1883). 


596 


ACTIONS  BETWEEN  PARTNERS. 


Bk.  III. 
Chap.  10. 
Sect.  6. 


[  *  524] 

h.  Liability 
of  trustee 
not  sharing 
profits. 


c.  Liability 
of,  partners 
-who  are  not 
trustees. 


of  the  trust  property.  This  view  is  apparently  based 
upon  the  ground  that  the  pr  jfits  are  accretions  to  the 
trust  property  ;  and  that  the  trustee  is  as  much  liable 
for  them  as  for  the  property  itself  ;  and  that  he  is  not 
discharged  from  this  liability  by  the  circumstance  that 
he  has  divided  the  profits  with  his  co-partners.  But, 
plausible  as  this  view  is,  it  must  be  remembered  that 
in  the  case  now  supposed  the  profits  have  not  all  been 
earned  or  received  by  the  trustee,  but  by  himself  and 
others,  and  that  he  is  not  in  a  position  to  make  them 
refund  their  shares  of  the  profits  yielded  by  the  trust 
property.  It  would  therefore  be  highly  unjust  to  make 
the  trustee  accountable  for  more  than  his  own  share  of 
such  profits  ;  and  this  view  has  been  adopted  by  the 
courts  of  appeal  both  in  England  and  Scotland  (s).1 

*  The  same  considerations  lead  to  the  conclusion  that 
a  co-trustee  who  is  not  himself  a  member  of  the  firm 
deriving  profit  from  the  use  of  the  trust  money,  and 
who  consequently  does  not  himself  derive  any  profit 
from  that  use,  is  not  accountable  for  any  of  the  profits 
yielded  by  the  trust  property  (t). 

Lastly,  we  have  to  consider  the  position  of  the  part- 
ners who  are  not  trustees,  but  who  have  shared  the 
profits  derived  from  the  use  of  the  trust  property.  With 
respect  to  them,  the  first  thing  to  ascertain  is  whether 
they  are  personally  implicated  in  any  breach  of  trust  ; 
for  if  not,  they  are  under  no  liability  in  respect  of  the 
profits  in  question — indeed,  they  may  not  even  be  liable 
to  make  good  the  trust  money  (u).  But  if  they  have 
traded  with  the  trust  money  knowing  that  its  employ- 
ment in  trade  was  a  breach  of  trust,  they  incur  the 
same  liabilities  in  respect  of  it  as  if  they  were  them- 
selves trustees.  Consequently  they  become  jointly  and 
severally  liable  as  well  for  the  trust  property  itself  as 
for  the  profits  which  they  have  made  by  it  (x).  But 
this  liability  cannot  be  enforced  except  in  an  action  to 


(s)  See  Vyse  v.  Foster,  L.  R.  7 -H.  L.  318,  andSCh.  309;  Laird 
r.  Chisholm,  30  Scottish  Jur.  582.  In  both  of  these  cases  the 
trustees  only  were  sued.  See,  also,  Jones  v.  Foxall,  15  Beav. 
388,  p.  395  ;*  Palmer  v.  Mitchell,  2  M.  &  K.  672.  Whether  the 
case  would  be  different  if  all  the  other  partners  were  parties  is 
doubtful.  See  Vyse  v.  Foster,  ubi  supra.  See  a  thoughtful  article 
on  this  subject  in  The  Law  Quarterly  Review,  1887,  p.  211. 

(/)  See  Vyse  v.  Foster,  infra,  p.  534. 

(u)  Ante,  p.  160. 

(*)  See,  accordingly,  Flocton  v.  Bunning,  8Ch.  323,  note,  infra, 
p.  530. 

1  Sequin's  Appeal,  supra  ;  Long  v.  Magestre,  1  Johns.  Ch, 
305  (1814). 


ACCOUNT — PROFITS  SINCE  DISSOLUTION.  597 

which  they  are  all  parties   (y).     It  has,  indeed,  been  Bk.  III. 
doubted  whether  there  is  any  joint  and  several  liability  gjJJjP'g    ' 

as  regards  profits,  and  whether  the  non-trustee  part- — _ 

ners  are  liable  for  more  than  the  trust  property  and  in- 
terest (z). 

Assuming  that  a  person  is  entitled  to  an  account  of  Practical 
profits  made  by  the  use  of  his  property  in  trade,  it  is  difficulty  in 

obviously  often  extremely  difficult   to  ascertain  these  carrvin?  °.ut 
»_.,,,  ,.  k  ■    •  the  foregoing 

profits.     To  take  the  ordinary  case  of  surviving  part-  principles. 

ners  continuing  to  trade  with  the  capital  of  a  deceased 
partner,  great  difficulty  will  be  found  in  arriving  at 
the  share  of  profits  to  which  the  executors  of  the  de- 
ceased are  entitled. 

It  is  very  easy  to  say  they  can  be  calculated  by  the 
rule  of  three — as  the  whole  capital  is  to  the  whole 
profits,  so  is  the  *  late  partner's  share  in  the  capital  [*  525] 
to  his  share  of  the  profits — but  this  assumes  that  the 
profits  in  question  have  been  made  by  capital  only. 
Profits,  and  very  large  profits,  may  be  made  by  skill, 
and  an  extensive  connection,  with  little  or  no  capital ; 
and  even  if  there  be  capital,  the  profits  may  be  at- 
tributable less  to  it  than  to  other  matters,  and  it  may 
be  impossible  to  determine  with  any  precision  the  ex- 
tent to  which  the  capital  has  contributed  to  the  realisa- 
tion of  the  profits  obtained  (a).  Special  inquiries  on 
this  subject,  therefore,  are  almost  always  necessary, 
and  if  it  can  be  shown  that,  having  regard  to  the  nature 
of  the  business  or  other  circumstances,  the  profits  which 
have  been  made  cannot  be  justly  attributed  to  the  use 
of  the  capital  or  assets  of  the  late  partner,  his  prima 
facie  right  to  share  such  profits  will  be  effectually  re- 
butted. 

The  extent  of  the  liability  to  account  for  subsequent  Willett  v. 
profits  was  elaborately  discussed  by  the  late  V.-C.  Wig-  Blanford. 
ram  in  Willett  v.  Blanford  (&),  and  the  conclusion  ar- 
rived at  by  him  was,  that  no  general  rule  could  be  laid 
down  upon  the  subject,  and  that  every  case  must   de- 
pend on  its  own  circumstances.      "  The   nature  of   the 

(y)  See  Vyse  V.  Foster,  and  Laird  r.  Chisholra.  ubi  supra  ;  Simp- 
son v.  Chapman,  4  De  G.  M.  &  Y.  174,  per  Turner,  L.  J.  Com- 
pare Brown  v.  De  Tastet,  Jac.  284 ;  Macdonald  v.  Richardson,  1 
Gift'.  81  ;  Bowes  v.  City  of  Toronto,  11  Moore,  P.  C.  463. 

(z)  See  Vyse  r.  Foster,  infra,  p.  534  ;  Stroud  v.  Gwyer,  28 
Beav.  130  ;  'Macdonald  o.  Richardson,  1  Giff.  88.  But  in  Flock- 
ton  v.  Bunning,  8  Ch.  323.  note,  infra,  p.  530,  the  liability  was 
treated  as  perfectly  clear. 

(a)  This  difficulty  was  felt  very  strongly  in  Featherstonhaugh 
v.  Turner,  25  Beav.  382,  noticed  infra,  p.  536. 

(6)  1  Ha.  253. 


598  ACTIONS  BETWEEN  PARTNERS. 

Bk.  III.  trade,  the  manner  of  carrying  it  on,  the  capital  ein- 

Chap.  10.        ployed,  the  state  of  the  account  between  the  late  part- 
ec  '•    '  nership  and  the  deceased  partner  at  the  time   of  his 

death,  and  the  conduct  of  the  parties  after  his  death, 
may  materially  affect  the  rights  of  the  parties."  This 
conclusion  of  the  Vice-Chancellor  was  entirely  in  ac- 
cordance with  previous  decisions  (c),  and  has  been  ap- 
proved by  subsequent  judges;  and  in  conformity  there- 
with several  cases  have  since  been  decided,  in  which 
profits  acquired  after  the  death  of  a  partner  were  held 
to  belong  wholly  to  those  by  whose  labour  they  had 
been  made.  An  element  of  uncertainty  is  thus  intro- 
duced into  an  already  difficult  and  complicated  branch 
of  law,  and  renders  it  extremely  embarrassing;  but  it 
is  hoped  that  the  foregoing  attempt  to  explain  its  prin- 
ciples may  tend  to  introduce  more  certainty  in  their 
future  application. 
[  '*  526]  *  Passing  now  to  the  decisions,  to  which  the  fore- 

going observations  are  intended  to  serve  as  an  intro- 
duction, the  right  to  an  account  of  profits  subsequent 
to  a  dissolution  will  be  found  distinctly  laid  down  in 
the  following  cases. 
Bankruptcy.        The  first  case  of  importance  on  the  subject  is  Craiv- 
Crawshay  v.    shay  v.  Collins  (d).     There  one  partner  had  become 
Collins.  bankrupt,  and  the  solvent  partners  had  carried  on  the 

business  without  paying  out  the  bankrupt's  share  of 
the  assets,  and  an  inquiry  was  directed  with  a  view  to 
ascertain  whether  profits  made  subsequently  to  the 
bankruptcy  were  made  by  the  application  of  the  funds 
which  then  constituted  the  capital  of  the  concern  (e), 
or  by  the  application  of  any  other,  and  what  funds; 
and  the  master  was  directed  to  distinguish  between 
capital  and  stock  in  trade  (/).  The  object  of  this  in- 
quiry was  to  ascertain  whether  the  profits  made  after 
the  dissolution  were  actually  made  by  the  application 
of  the  funds  that  belonged  to  the  bankrupt  as  a  mem- 
ber of  the  partnership  (g).  And  it  appearing  that 
such  profits  were  made,  it   was  held  by  Lord   Eldon, 

(c)  See  in  particular  Lord  Eldon's  observations  on  Crawshay 
r.  Collins,  in  Jac.  pp.  622  and  297.  and  2  Russ.  330. 

(rf)  15  Ves.  218  ;  1  J.  &  W.  267  :  and  2  Russ.  325.  The  de- 
cision in  15  Ves.  218,  was  afterwards  said  by  Lord  Eldon  not  to 
have  none  to  the  extent  ordinarily  supposed.  See  Jac.  296  and 
622,  and  2  Russ.  330.  Brown  v.  Vidler,  cited  in  15  Yes.  223, 
and  2  Russ.  340,  is  an  earlier  case  in  point.  See,  too.  Brown  v. 
Litton.  1  P.  W.  141,  and  10  Mod.  20  ;  Hammond  v.  Douglas,  5 
Ves.  539. 

(e)  15  Ves.  218. 

(/)  1J.  &W.  267. 

(g)  2  Russ.  337. 


ACCOUNT — PROFITS  SINCE  DISSOLUTION.  599 

and  afterwards  by  Lord  Lyndhurst  (on  a  re-hearing),  Bk.  III. 
that  the  assignees  had  a  right  to  a  share  of  these  pro-  Chap.  10- 
fits,  and  that  the  account  could  not  stop  until  the  claims    ec  '    ' 
of  the   assignees   were   satisfied.     The    bankrupt  was 
originally  entitled  to  three-eighths  of  the  partnership 
assets,  and  although  he  was  indebted  to  the  firm,  so 
that  the   sum   actually  payable  to  him  was  less  than 
three-eights  of  the  net  assets  of  the  firm,  and  although 
the  continuing  partners  had  brought  in  a  large  addi- 
tional capital  since  the  bankruptcy,  still  the  assignees 
were  held  entitled  to  be  credited  throughout  with  three- 
eighths  of  the    profits,  being   debited  with  what  the 
bankrupt  owed.      The  decree  in  this  important  case  de 
clared  that  the  three-eighth  parts  or  shares  of  the  bank- 
rupt in  the  partnership  ought  to  be  considered  as  con- 
tinuing notwithstanding,    and  after,   his  bankruptcy; 
and  *  that  the  assignees  were  entitled  to  three-eighth  [  *  527] 
parts  of  the  profits  which  had  been  already  reported  to 
have  been  made;  and  three-eighth  parts  of  such  further 
profits  as  (on  taking  the  further  accounts  thereby  di- 
rected) should  appear  to  have  been  made  (h). 

So,  in  Brown  v.  De  Tastet  (i),  where  one  partner  died  Death, 
and  the  survivor  carried  on  the  partnership  business,  Brown  v. 
without  accounting  for  the  share  of  the  deceased  to  his  De  Tastet. 
administratrix,  an  account  was  directed  at  the  suit  of 
the  administratrix,  not  only  of  the  dealings  and  trans- 
actions of  the  partners  up  to  the  death  of  the  deceased 
partner,  but  also  of  the  property  of  the  deceased  in  the 
hands  of  the  surviving  partner,  and  of  all  profits  and 
gains  made  by  him  by  means  of  such  property. 

Yates  v.  Finn  (k)  is  another  case  of  the  same   sort;  Yates  v. 
and  there  the  surviving  partner  was  decreed  to  account  Finn, 
for  the  profits  made  by  means  of  the  capital  of  the  de- 
ceased partner,  but  was  allowed  a  proper  sum  for  man- 
aging the  business. 

The  rule  established  in  these  cases  has  been  applied  other 
in  a  variety  of  instances;  e.  g.,  where  a  managing  part-  instances. 
ner  had  continued  the  business  after  the  period  fixed 
for  the  dissolution  and  winding  up  of  the  partnership  (I) ; 

{h)  2  Buss.  347. 

{i)  Jac.  284.  It  is  said  in  2  M.  &  K.  658,  that  this  ease  was 
affirmed  by  the  House  of  Lords,  and  after  all  to  have  been  aband- 
oned by  the  plaintiff,  who  found  it  impossible  to  work  out  the 
decree.  See,  too,  Featherstonhaugh  v.  Turner,  25  Beav.  382; 
Smith  v.  Everitt,  27  ib.  44G;  Booth  v.  Parks,  1  Moll.  465,  and 
Beatty,  444. 

Ik)  13  Ch.  D.  839. 

(1)  Parsons  v.  Hayward,  31  Beav.  199,  affirmed  on  appeal,  4 
De.  G.  F.  &  J.  474. 


600 


ACTIONS  BETWEEN  PARTNERS. 


Bk.  III. 
Chap.  10. 
Sect.  6. 


[*528] 

Option  to 
take  interest 
or  profits. 


Account  of 

subsequent 

profits 

against 

executors 

■who  are 

surviving 

partners. 


where  a  partner  had  become  lunatic  and  the  firm  had 
been  dissolved,  but  the  business  had  been  continued  by 
the  other  partners,  and  they  had  not  paid  out  the  capi- 
tal of  the  lunatic  partner  (m);  where  partners  had 
agreed  to  dissolve  and  to  have  the  partnership  business 
wound  up,  and  its  assets  got  in  and  converted  by  a 
third  person,  and  one  of  the  partners  nevertheless  car- 
ried on  the  business  in  the  meantime  for  his  own  bene- 
fit (n);  where  a  mining  partnership  had  been  dissolved, 
but  one  of  the  partners  had  obtained  a  renewed  lease  of 
the  mine,  and  had  coDtinued  to  work  it  for  his  own  ben- 
efit (o).1 

*  In  the  foregoing  cases  it  will  be  observed  there  was 
no  relation  of  trustee  and  cestui  que  trust  (as  distin- 
guished from  that  of  late  partnership)  subsisting  be- 
tween the  persons  who  made  the  profits  and  those  who 
were  held  entitled  to  share  them.  But  even  where  there 
is  no  true  relation  of  trustee  and  cestui  que  tnist,  part- 
ners continuing  to  carry  on  business  without  coming  to 
an  account  w7ith  their  late  partner,  or  those  who  repre- 
sent him,  are  liable  to  be  charged  either  with  the  profits 
made  by  the  use  of  his  capital,  or  with  interest  on  it  at 
bl.  per  cent.,  at  the  option  of  those  to  whom  such  capi- 
tal belongs  (p) ;  but  in  taking  an  account  of  subsequent 
profits,  the  partner  by  whose  exertions  they  have  been 
made  is  usually  allowed  compensation  for  his  trouble  (q), 
unless  he  is,  in  the  proper  sense  of  the  word,  a  trustee, 
and  guilty  of  a  breach  of  trust,  when  no  such  compen- 
sation is  allowed  (r). 

The  rights  of  the  legatees  and  next  of  kin  of  a  de- 
ceased partner  against  his  executors  where  they  are 
themselves  surviving  partners  or  have  themselves  be- 

(m)  Mellersh  v.  Keen,  27  Beav.  236. 

In)  Turner  v.  Major,  3Giff.  442. 

(o)  Featherstonhaugh  r.  Fenwick,  17  Ves.  298.  See,  too,  Clem- 
ents v.  Hall,  2  De  G.  &  J.  173. 

(;;)  Booth  v.  Parks,  1  Moll.  465,  and  Beatty,  444.  See,  also, 
Clements  v.  Hall,  2  De  G.  &  J.  186;  Toulmin  v.  Copland.  2  Ph. 
711,  reversing  S.  C.  4  Ha.  41. 

[q)  Yates  v.  Finn,  13  Ch.  D.  839;  Brown  v.  DeTastet,  Jac.  284. 
See,  also,  ib.  623;  Featherstonhaugh  v.  Turner,  25  Beav.  382; 
Mellersh  r.  Keen,  27  ib.  242. 

(r)  Stocken  v.  Dawson,  6  Beav.  371,  and  9  ib.  247;  Burden  r. 
Burden,  1  V.  &  B.  170.  See,  however,  Cookf.  Collingridge,  Jac. 
622,  623. 


1  For  instances  of  the  application  of  this  rule  see  Brown's  Ap- 
peal, 89  Pa.  St.  139  (1879);  Hay's  Appeal,  91  Pa.  St.  265  (1879); 
Freeman  v.  Freeman.  136  Mass"  260  (1884);  Potter  v.  Moses,  1  R. 
I.  430  (1850);  Goodburn  v.  Stevens,  5  Gill.  1  (1847);  Chittenden 
v.  AVitbeck,  50  Mich.  401  (1883);  Fitzpatrick  v.  Flamiagan,  106 
U.  S.  648  (1882). 


ACCOUNT — PROFITS  SINCE  DISSOLUTION.  601 

come  partners  since  his  death,  are  illustrated  by  the  fol-  Bk.  III. 
lowing  decisions.  SectP6 

In  Cook  v.   Collingridge  (s),  the  executors  of  a  de- 


ceased partner  sold  their  testator's  share  to  the  surviv-  Cook y.  Col- 
ing  partners,  who  resold  it  to  one  of  the  executors.  The  UnoritIge- 
sale  was  set  aside  at  the  instance  of  a  legatee,  and  an 
account  of  profits  made  subsequently  to  the  death  of 
the  deceased  partner  was  decreed,  although  the  money 
paid  for  the  testator's  share  was  not  continued  in  the 
business. 

In  Townend  v.    Toivnend  (t),  three  brothers,  A.,  B.,  Townend  c. 
C,  were  in  partnership,  under  articles  by  which  it  was  Townend. 
provided  that  the  capital  of  the  partners  should  not  be 
withdrawn  until  the  *  expiration  of  seven  years  from  [  *  529] 
that  date;  that  in  case  of  the  death  of  one  of  the  part- 
ners within  that  term,  a  valuation  of  his  share  should 
be  made,  and  that  the  surviving  partners  should  pay  to 
his  representatives  the  amount  of  such  valuation  within 
three  years  from  the  said  term  of  seven  years,  and  in 
the  meantime  give  sufficient  security  for  the  same  by  a 
mortgage  of  a  competent  part  of  the  partnership  prop- 
erty.    It  was  also  provided  that  it  should  not  be  law- 
ful for  the  representatives  to  commence  any  action  for 
recovering  payment  of  the  share  of  the  deceased,  until 
the  end  of  three  years  after  the  expiration  of  the  term 
of  ten  years,  nor  to  claim  any  participation  in  the  pro- 
fits made  after  the  day  up  to  which  the  valuation  was 
made;    the  expressed  intention  being  that  the  repre- 
sentatives of  the  partner  dying  should    take  bl.   per 
cent,  on  the  value  of  the  share  in  lieu  of  profits.     It 
was  further  provided  that  nothing  should  prejudice  the 
right  of  the  representatives  within  the  term  of  seven 
years,  to  take  any  proceedings  in  order  to  obtain  a  fair 
valuation,  or  to  obtain  and  enforce  the  mortgage  secur- 
ity.    In  April,  1844,   A.  died,  having  by  will  devised 
his  real  and  personal  estate  to  B.,  C.  and  D.  upon  ti-ust, 
to  raise  the  sum  of   12,000Z.   and   invest  the  same  in 
government  or  real  security,  and  apply  the  proceeds 
towards  the  maintenance  and  education  of  the  plaintiff, 
his  then  infant  daughter,  and  accumulate  the  surplus 
at  compound  interest;  and  upon  his  daughter  attain- 
ing twenty-one,  to  pay  the  accumulations  to  her,  and 
to  stand  possessed  of  the  capital  on   trust  to  pay  her 
the  proceeds  during  her  life.      The  testator's  estate  con- 

(s)  Jac.  607.  See  the  decree  in  27  Beav.  456.  Stocken  r.  Daw- 
son, 9  Beav.  239,  and  on  appeal  17  L.  J.  Ch.  282,  was  a  somewhat 
similar  ease. 

{I)  1  Gift'.  201. 


602  ACTIONS  BETWEEN  PARTNERS. 


Bk.  III.  sisted  almost  entirely  of  his  share  in  the  partnership. 

Chap.  10.        jn  DecemDer,  1844,  a  valuation  was  made,  by  which 

_£!!__!_ the  testator's  share  was  ascertained  to  be  20,000Z.  and 

upwards.  In  June,  1853,  being  more  than  ten  years 
from  the  date  of  the  articles,  certain  hereditaments, 
consisting  of  freeholds,  leaseholds,  and  machinery  (part 
of  the  partnership  assets)  were  mortgaged  by  B.  to  C. 
and  D.,  as  a  security  for  the  12,000Z.  (u).  The  plain- 
tiff came  of  age  in  1857,  and  in  1858,  B.  and  C.  ren- 
dered to  her  an  account  of  the  trust  funds,  in  which 
they  debited  her  with  various  items  for  maintenance 
[  *  530]  and  education,  with  5Z.  per  *  cent,  interest  thereon,  and 
credited  her  with  the  sum  of  12,000Z.  and  interest  at 
5Z.  per  cent,  with  yearly  rests,  up  to  the  1st  May,  1853, 
and  thenceforth  with  interest  at  4Z.  per  cent,  with 
yearly  rests.  The  plaintiff,  however,  insisted  that  the 
12,000Z.  had  been  continued  in  the  partnership  busi- 
ness, and  she  filed  a  bill  against  B.,  C,  and  D.,  for  an 
account  of  the  profits  made  in  the  partnership  business 
on  the  sum  of  12,000Z.  from  the  testator's  death,  and 
for  payment  of  what  should  be  found  due  to  the  plain- 
tiff, alleging  that  the  mortgage  was  an  improper  secur- 
ity. The  Court  held,  1,  That  the  plaintiff  was  entitled 
to  an  account  of  the  legacy  of  12,000Z.,  with  interest  at 
5Z.  per  cent,  from  one  year  after  the  testator's  death  up 
to  the  1st  January,  1849  (ten  years  from  the  date  of 
the  articles),  and  with  compound  interest  on  the  sur- 
plus, after  allowing  for  sums  expended  for  her  mainte- 
nance and  education ;  2,  that  the  plaintiff  was  entitled 
to  an  account  of  the  profits  made  by  the  partners  from 
the  1st  January,  1849,  on  the  balance  found  due  for 
the  principal  at  that  date,  with  interest  at  5Z.  per  cent, 
and  annual  rests;  3,  that  she  was  entitled  to  a  decree  for 
payment  of  what  should  be  so  found  due;  and,  4,  that 
the  entry  of  the  sum  of  12,000Z.  in  the  account  furnish- 
ed by  B.  and  C.  must  be  taken  as  conclusive  against 
them  that  they  had  such  a  sum  in  their  hands.  It  was 
considered  that  the  mortgage  had  not  the  effect  of  with- 
drawing the  12,000Z.  from  the  business:  it  was  part  of 
a  plan  for  keeping  the  money  in  the  business;  and  the 
12,000Z.  ought  not  to  have  been  left  on  the  security  of 
property  from  which  the  trustees  ought  to  have  re- 
covered it. 
Maedonald  v.  In  Macdonald  v.  Richardson  (x),  a  partner  died, 
Richardson,    leaving  his  co-partner  and   another   person   his   execu- 

(u)  The  property,  so  far  as  it  could  be  regarded  as  an  author- 
ised security,  was  not  an  adequate  security  for  12,000/. 
(.r)  1  Giff.  81.     See,  also,  Docker  v.  Somes,  2  M.  &  K.  655 


ACCOUNT — PROFITS  SINCE  DISSOLUTION.  603 

tors,  and  the  copartner  executor  afterwards  took  other  Bk.  III. 
persons  into  partnership  with  him.     The  testator's  as-  Chap.  10. 
sets  having  been  kept  in  the  business,  the  legatees  filed    ec  ' 
a  bill  against  the  executors,  and  them   only,  claiming 
an  account  of  profits  since  their  testator's  death;  and  a 
decree  was  made  in  their  favour  (y). 

In  Flockton  v.  Bunning  (s),  a  partner  died,  leaving  Flockton  v. 
his  wife  *  his  executrix,  and  having  directed  her  to  get  Running. 
in  his  estate  and  invest  it  for  the  benefit  of  herself  and  L  W£,C*1J 
children.  She  wound  up  the  partnership  in  which  her 
husband  was  engaged,  but  continued  to  carry  on  the 
business  with  his  capital,  in  partnership  with  other 
persons,  who  knew  that  in  so  doing  she  and  they  were 
committing  a  breach  of  trust  (a).  A  bill  was  filed  by 
some  of  the  children  against  her  and  her  co- partners, 
seeking  to  make  them  jointly  and  severally  liable  for 
the  trust  estate  employed  in  the  business,  and  for  the 
profits  made  by  its  use  ;  and  a  decree  to  that  effect  was 
made  and  was  affirmed  on  an  appeal  by  the  wife's  part- 
ners. This  case  was  decided  on  the  principle  that  the 
wife's  partner's  were  clearly  implicated  in  the  breach 
of  trust  committed  by  her,  and  were  jointly  and  sev- 
erally responsible  with  her  for  the  trust  estate  and  all 
the  profits  made  thereby.  The  widow's  capital  was 
trust  property  ;  there  was  no  loan  as  in  Stroud  v. 
Givyer  (b),  but  the  widow's  capital  became  part  of  the 
capital  of  the  firm  ;  and  she  and  her  co-partners  wrong- 
fully traded  with  it  (c).  Both  L.  J.  "Wood  and  the  L. 
J.  Selwyn  agreed  that  a  mere  loan,  although  in  breach 
of  trust,  would  not  involve  liability  to  account  for 
profits,  but  that  trust  property  which  was  traded  with 
by  a  trustee  in  partnership  with  others,  could  not  be 
regarded  as  a  loan  (d). 

The  right  of  the  cestui  que  trust  against  his  trustee  option  in 
in  these  cases  is  to  an  account  of  profits  made   by  him  these  cases. 
by  the  use  of  the  trust  property,  or  at  the  option  of  the 

(y)  It  is  not  quite  clear  whether  the  executor,  who  was  a  part- 
ner, was  ordered  to  account  for  more  profits  than  he  received  or 
not. 

(z)  8  Ch.  323.  note.  The  writer  was  counsel  for  the  appellants, 
and  this  statement  of  the  case  was  written  from  the  short-hand 
writer's  notes  of  the  judgment. 

(a)  In  fact,  she  agreed  to  indemnify  them  against  the  conse- 
quences. 

(b)  28  Beav.  130,  ante,  p.  521. 

(c)  Compare  this  case  with  Vyse  v.  Foster,  L.  R.  7  H.  L.  318, 
and  8  Ch.  309,  noticed  in  infra,  p.  534. 

(d)  See,  also,  as  to  this,  Travis  v.  Milne,  9  Ha.  141,  where, 
however,  interest  only  was  ordered  to  be  paid. 


604  ACTIONS  BETWEEN  PARTNERS. 

Bk.  III.  cestui  que  tt-ust  to  simple  interest  at  hi.   per  cent   (e)  ; 

Chap.  10.        or  jn  Special  cases  to  compound  interest  (/). 

Sect-  6-  *  The  next  class  of  cases  which  it  is  necessary  to 

[  *  532]  notice,  is  that  in  which  surviving  or  continuing  part- 
ners were  held  not  liable  to  account  for  profits  made 
after  dissolution. 

Simpson*.  Tne  first  of  tnese   was   simPson  v-    Chapman    (g). 

Chapman.  There  three  persons  were  partners  as  bankers.  The 
bank  was  in  such  good  credit  as  to  render  no  capital 
necessary  for  the  purpose  of  carrying  it  on.  One  of 
the  partners  died,  leaving  his  son,  one  of  the  surviving 
partners,  and  a  third  person,  his  executors.  At  the 
time  of  his  death  the  assets  of  the  bank  exceeded  its 
liabilities.  The  estate  of  the  deceased  was  a  creditor 
of  the  bank  to  the  extent  of  his  share,  viz.,  one-third 
of  its  net  assets,  but  there  was  a  much  larger  sum 
owing  from  his  estate  to  the  bank  on  his  overdrawn 
private  account.  The  son,  being  also  an  executor  of 
the  deceased,  was  admitted  as  a  partner  in  the  bank, 
and  the  business  was  carried  on  by  the  son  and  surviv- 
ing partners,  but  the  amount  of  the  deceased's  share  in 
the  business  was  never  paid  out,  or  separated  from  the 
monies  of  the  bank.  Considerable  profits  were  made 
by  the  new  partnership,  and  of  these  the  son,  as  part- 
ner, received  his  share.  A  suit  was  instituted  for  the 
administration  of  the  estate  of  the  deceased,  but  to 
such  suit  the  executors  alone  were  defendants,  and  a 
decree  was  made  charging  the  son,  and  the  surviving 
partner,  who  was  an  executor,  in  respect  of  the  profits 
of  the  bank  from  the  death  of  the  deceased,  paid  to  the 
son,  so  far  as  such  profits  had  accrued  from  the  assets 
of  the  deceased  employed  in  the  partnership.  This  part 
of  the  decree  was  appealed  from  and  reversed,  and  one 
of  the  grounds  for  the  reversal  was,  that  the  profits 
acquired  after  the  death  of  the  deceased  could  not  be 
attributed  to  the  use  made  of  his  capital.  If  the  debt 
due  from  him  to  the  bank  were  omitted  from  its  assets, 
the  bank  was  at  his  death  insolvent.  The  deceased  had 
no  capital  in  it  in  the  ordinary  sense  of  the  word,  and 
all  the  profits  which  had  accrued  were  attributable  to 

(e)  Heathcote  v.  Hulme,  1  Sac.  &  W.  122. 

(/)  If  the  trustee's  duty  is  to  call  in  the  money  and  accumu- 
late the  income,  he  will  he  charged  with  compound  interest  ; 
there  may  possibly  be  other  grounds  for  so  charging  him.  See 
Jones  v.  Foxall,  15  Beav.  388;  Williams  v.  Powell,  ib.  461,  and 
Lord  Selborne's  observations  in  Vyse  v.  Foster,  L.  B.  7  H.L.  316. 

(g)  4  De  G.  M.  &  G.  154.  This  case  is  the  more  important  as 
the  non-liability  to  account  for  subsequent  profits  was  decided 
on  the  hearing  of  the  cause. 


ACCOUNT — PROFITS  SINCE  DISSOLUTION.  605 

the  connection  and  reputation  of  the  bank.     It  was  Bk.  III. 
urged  that  the  son,  who  had  received  one-third  of  the  ^c£'e,   ' 

profits,  and  who  could  not  distinguish  how   much   of     ^  'r   '    

them  was  attributable  to  his  character  *  of  executor,  L  o66\ 
and  how  much  belonged  to  him  in  his  individual  char- 
acter as  partner,  ought  to  be  charged  with  the  whole. 
But  it  was  held  that  this  principle  did  not  apply,  inas- 
much as  he  did  not  carry  on  the  business  as  an  execu- 
tor, but  in  his  own  separate  and  individual  right,  con- 
ceiving that  he  was  entitled  so  to  carry  it  on. 

Another  case  of  the  same  class  was  Wedclerburn  v.  Wedderbum 
Wedderbum  (h).  There  three  persons  were  partners  v.  Wedder- 
as  merchants;  one  died,  leaving  the  other  two  and  his  burn- 
widow  his  executors.  The  surviving  partners  alone 
proved  the  will,  and  they  drew  up  an  account  of  the 
partnership  assets  and  credited  the  estate  of  the  de- 
ceased with  a  certain  sum  as  his  share  in  the  concern, 
but  this  share  was  never  separated  from  the  assets  of 
the  continuing  firm.  Several  changes  afterwards  took 
place  in  the  new  firm,  and  then  a  suit  was  instituted  by 
persons  interested  in  the  estate  of  the  deceased  partner, 
against  the  executors  and  surviving  partners  of  the  de- 
ceased, praying  for  an  account  of  his  estate,  and  for  an 
account  of  the  gains  and  profits  made  by  carrying  on 
the  partnership  after  his  death.  A  decree  was  made 
directing  an  account  of  the  personal  estate  of  the  de- 
ceased partner;  and  of  the  dealings  and  transactions  of 
the  firm  up  to  his  death;  and  of  what  at  that  time  was 
the  value  of  his  interest  in  the  concern;  and  of  the 
profits  of  the  trade  carried  on  by  the  succeeded  firms; 
and  of  the  monies  which  were  from  time  to  time  taken 
out  of  the  concern,  and  applied  on  account  of  the 
estate  of  the  deceased;  and  of  the  amount  of  capital 
from  time  to  time  employed  in  the  said  firms  respec- 
tively (i).  It  appeared  that  at  the  death  of  the  de- 
ceased the  assets  of  the  firm  consisted  almost  entirely 
of  debts  due  to  it;  that  it  was  impossible,  except  at  a 
great  sacrifice,  to  get  in  these  debts  in  a  short  time; 
that  if  an  attempt  had  been  made  to  wind  up  the  affairs 
of  the  concern  at  the  death  of  the  deceased,  the  assets 
of  the  firm  would  not  have  sufficed  to  discharge  its  lia- 
bilities; and  that  the  ultimate  solvency  of  the  firm  was 
attributable  to  the  cautious  and  prudent  conduct  of  the 
surviving  partners,  and  to  their  having,  from  time  to 
time,  provided  large  sums  of  money  to  meet  *  pressing  [  *  534] 
liabilities  (k).     It  thus,  in  fact,  appeared  that  the  pro- 

(h)  2  Keen,  722;  .4  M.  &  Cr.  41;  and  22  Beav.  84. 
(0  2  Keen,  752.  (A)  See  22  Beav.  84. 


606  ACTIONS  BETWEEN  PARTNERS. 


Bk.  III.  fits  made  since  the  death  of  the  deceased  were  made  by 

Chap.  10.        ^e   cre(jit   and   connection  of   the  house,  and  by  the 

'    reputation,  skill,  and  ability  of  the  surviving  and  later 

partners,  and  were  not  attributable  to  the  surplus  as- 
sets of  the  firm  in  which  the  deceased  had  a  share.  It 
further  appeared  that  the  share  of  the  deceased  had 
been  preserved  entirely  by  the  prudent  management  of 
the  executors,  and  would  have  been  certainly  reduced 
to  nothing  if  they  had  wound  up  the  affairs  of  the 
house  in  the  ordinary  way,  or  had  thrown  the  estate  of 
the  deceased  into  Chancery.  Under  all  the  circumstances 
of  the  case  it  was  therefore  held  that  as  by  the  part- 
nership articles  the  plaintiffs  had  no  interest  in  the 
good-will  of  the  concern,  they  were  not  entitled  to  par- 
ticipate in  the  profits  made  by  the  successive  firms,  so 
far  as  those  profits  were  attributable  to  the  good-will 
and  connection  in  trade  of  the  old  firm;  and  that  their 
share  in  any  profits  attributable  to  any  other  source  was 
covered  by  interest  on  the  amount  at  which  the  share  of 
the  deceased  had  been  valued. 
Vyse  r.  Lastly,  in  Vyse  v.  Foster  (I),  the  partnership  articles 

Foster.  provided  that  on  the  death  of  a  partner  the  amount  of 

his  share  should  be  ascertained  and  be  paid  out  with 
interest,  by  instalments,  running  over  two  years.  A 
partner  died  leaving  throe  executors,  one  of  whom  was 
a  surviving  partner.  The  share  of  the  deceased  was 
ascertained;  it  was  not,  however,  paid  out  at  the  end  of 
two  years,  but  was  kept  in  the  business,  which  was  car- 
ried on  for  many  years,  first  by  one  and  then  by  two  of 
the  executors,  with  other  persons.  The  continuing 
firms  paid  interest  on  the  capital  of  the  deceased  partner, 
and  all  the  persons  beneficially  interested  in  his  estate, 
except  the  plaintiff,  acquiesced  in  this  arrangement. 
The  plaintiff,  soon  after  coming  of  age,  demanded  her 
share  of  the  estate  of  the  deceased,  and  also  the  profits 
made  by  its  employment  in  the  business.  The  firm 
paid  her  the  principal  sum  due  to  her,  with  compound 
[  *  535]  interest,  at  61.  per  cent.,  but  declined  to  account  *  to  her 
for  any  profits.  She  thereupon  filed  a  bill  against  the 
executors,  and  them  alone,  for  an  account  of  the  profits. 
A  decree  was  made  in  her  favour,  and  the  defendants 
were  declared  liable  for  all  the  profits  made  by  the  suc- 
cessive firms,  by  the  use  of  her  share  of  the  deceased 
partner's  estate.     The  court  of  appeal,  however,  reversed 

(1)  8  Ch.  309,  and  L.  R.  7  H.  L.  Ca.  318.  The  case  came  again 
before  the  court  as  to  the  mode  of  ascertaining  the  amount  due 
to  the  deceased,  see  10  Ch.  236.  See  the  Law  Quarterly  Review 
for  1887,  p.  211. 


ACCOUNT — PROFITS   SINCE  DISSOLUTION.  607 

this  decision,  and  held  that  although   there  had  been  Bk.  III. 
technically  a  breach  of  trust  in   not   paying  out  the  £hap'  10" 

capital  of    the  deceased  partner   as    provided  by   the '       

partnership  articles,  still  the  plaintiff  could  not  possi- 
bly be  entitled  to  charge  the  defendants  in  the  suit,  as 
constituted,  with  more  profits  than  they  had  themselves 
received;  and  as  the  evidence  showed  that  they  had 
acted  throughout  with  perfect  fairness,  the  court  of 
appeal  refused  even  an  account  of  these  profits,  and  held 
that  under  all  the  circumstances  of  the  case  the  plain- 
tiff was  only  entitled  to  her  share  of  the  testator's 
estate,  with  the  compound  interest  at  5Z.  per  cent, 
which  had  been  offered  to  her.  The  decision  in  this 
case  is  extremely  important,  as  it  decided,  1,  that  the 
clause  in  the  partnership  articles  was  binding  both  on 
the  executors  of  the  deceased  partner  and  on  the  sur- 
viving partners,  although  one  of  them  was  also  an  execu- 
tor; 2,  that  the  amount  due  to  the  estate  of  the  deceased 
was  in  effect  a  loan  to  the  survivors,  and  its  non-pay- 
ment at  the  time  and  in  manner  prescribed  by  the  arti- 
cles of  partnership  did  not  entitle  the  plaintiff  to  any 
profits,  but  only  to  interest;  3,  that  even  if  the  plain- 
tiff's claim  to  profits  could  have  been  sustained,  the 
executor  who  was  not  a  partner,  would  not  have  been 
liable  for  such  profits;  and  4,  that  the  executors  who 
were  partners  would  not  have  been  liable  for  more  pro- 
fits than  they  respectively  themselves  received  {in). 

The  law  upon  the  subject  under  consideration  is  still  observations 
in  an  unsettled  state.      Undoubtedly  a  person  ought  not  on  the  fore- 
to   be  permitted   to   retain    for   his  own    use,  gains  ac-  going  cases. 
quired  by  the  unlawful  employment  of  another's  prop- 
erty; and  it  would  certainly  not  be  conducive  to  justice 
if  there  were  no  power  to   compel  a  discovery  of  the  r  *  5361 
amount  of  the  gains   so  made,  and  payment  *  of  that 
amount  by  the  wrong- doer   (n).     At  the  same  time, 
owing  to  the  extreme  difficulty  of  taking  an  account  of 
subsequent  profits,  so  far  as  they  are  attributable  only 
to  one  particular  source,  the  tendency  of  the  courts  in 
modern  times  appears  to  be  rather  in  favour  of  not  ex- 
ercising than  of  exercising  the  power  alluded  to,  except 
in  cases  of  gross  fraud  or  breach  of  trust  (o).     In  such 

(m)  See,  as  to  this,  Flockton  v.  Bunning,  8  Ch.  323.  note,  ante, 
p.  530,  and  the  observations  of  Lord  Cairns  in  L.  R.  7  H.  L.  333,  4. 

(n)  See  the  admirable  judgment  of  Lord  Brougham  in  Docker 
r.  Somes,  2  M.  &  K.  672. 

(o)  Judgments  for  an  account  of  profits  after  dissolution  are 
fearfully  oppressive  ;  and  the  writer  is  not  aware  of  any  instance 
in  which  such  a  judgment  has  been  worked  out  and  has  resulted 
beneficially  to  the  person  in  whose  favour  it  was  made. 


608 


ACTIONS  BETWEEN  PARTNERS. 


Bk.  III. 
Chap.  10. 
Sect.  6. 


Featherston- 
haugh  v. 
Turner. 


Evidence  on 
which 

accounts  are 
taken. 


[*537] 


cases,  however,  the  Court  will  exert  itself  to  the  utmost, 
and  the  efforts  which  it  will  make  in.  order  to  prevent 
persons  from  deriving  advantage  from  their  own  wrong, 
cannot  be  better  illustrated  than  by  the  case  of  Feather- 
stonhangh  v.  Turner  (p).  The  profits  of  the  partner- 
ship business  there  arose  entirely  from  the  skill  and 
reputation  of  the  partners,  who  were  medical  gentle- 
men. In  order  to  ascertain  the  share  of  the  deceased 
in  the  profits  made  after  his  death  by  the  surviving 
partner,  an  inquiry  was  directed  whether  any  and  what 
profits  made  since  the  death  of  the  deceased  were  at- 
tributable to  or  derived  from  persons  who  had  become 
customers  by  reason  of  the  deceased  having  been  a 
partner,  and  it  was  considered  that  the  surviving  part- 
ner was  liable  to  pay  what  might  be  found  due  on  tak- 
ing that  account,  after  deducting  a  liberal  allowance  to 
him  for  his  time,  knowledge,  and  expenses  in  realizing 
the  profits  in  question. 

With  respect  to  the  evidence  upon  which  the  accounts  are  to  he  taken. 

As  regards^  the  partnership  books.  These  being  ac- 
cessible to  all  the  partners,  and  being  kept  more  or 
less  under  the  surveillance  of  them  all,  are  primd  facie 
evidence  against  each  of  them,  and,  therefore,  also  for 
any  of  them  against  the  others  (q)-1  But  entries  made 
by  one  partner  without  the  knowledge  of  the  other  do 
not  prejudice  the  latter  as  between  *  himself  and  his 
co- partner  (r);2  and  where  a  surviving  partner  drew 
up  an  account  which  he  furnished  to  the  executors  of 

{p)  25  Beav.  382. 

(q)  See  Lodge  v.  Prichard,  3  De  G.  M.  &  G.  906,  and  Smith  v. 
The  Duke  of  Chandos,  2  Atk.  158,  and  Barn.  412.  But  see  the 
observations  of  L.  J.  Turner,  in  Stewart's  case,  1  Ch.  587. 

(r)  Hutcheson  v.  Smith,  5  Ir.  Eq.  117.  See,  also,  Reeve  v. 
Whitmore,  2  Dr.  &  Sin.  446,  where  it  was  held  that  although 
books  kept  by  a  person  may  be  used  against  him  as  showing 
what  he  has  received,  he  is  not  entitled  to  use  them  in  his  own 
favour  to  show  what  he  has  paid. 

1  Dunnell  r.  Henderson,  23  N.  J.  Eq.  174  (1872)  ;  Lambert  v. 
Griffith,  44  Mich.  65  (1880);  Withers  v.  Withers,  8  Pet.  355 
(1834) ;  Kitner  v.  Whitlock,  88  111.  513  (1877)  ;  Tucker  w.  Peaslee, 
36  N.  H.  167  (1853)  ;  Wheatley  v.  Wheeler,  34  Md.  62  (1870)  ; 
Fairchild  v.  Fairchild,  64  N.  Y.  471  (1876)  ;  Topliff  v.  Jackson, 
12  Gray,  565  (1859).  In  Saunders  v.  Duval.  19  Tex.  476  (1857), 
it  was  held  that,  to  make  the  books  evidence  against  a  partner, 
it  must  be  shown  that  he  actually  inspected  them. 

2  Banks  v.  Binney.  5  Mason,  176  (1828);  Wheatley  v.  Wheeler, 
34  Md.  62  (1870).  The  books  are  evidence  themselves.  It  is 
not  necessary  to  prove  their  entries  by  vouchers.  Powers  v. 
Dickie,  49  Ala.  81  (1873);  Brickhouse  v.  Hunter,  4  Hen.  &  M. 
(Va.)  363  (1809). 


ACCOUNT — EVIDENCE.  609 

his  late  partner,  it  was  held  that  such  account  was  ad-  Bk.  III. 
missible  against  the  partner  who  furnished  it,  and  that  £  *p' 
the  executors  were  not  bound,  by  using  it  against  him,         ' 
to  admit  its  correctness  throughout  (s).1 

Where,  in  consequence  of  the  loss  of  books  and  doc-  Special  direc- 
uments,  an  account  cannot  be  taken  in  the  usual  way,  tlon.s  on  tms 
special  directions  will  be  given  as  to  the  mode  in  which 
the  accounts  shall  be  taken  and  vouched.     The  power 
to  give  such  a  direction  is  expressly  conferred  by  Ord. 
XXXIII. ,  r.  3  (t). 

The  judgment  for  an  account  usually  directs  that  all  Production 
parties  shall  produce  on  oath  all  books  and  papers   in  of  books,  &c. 
their  custody  relating  to  the  taking  of  the  accounts.  If 
any  partner  has  kept  accounts  relating  to  the   partner- 
ship in  private  books  of  his  own,  ho  must  produce  such 
books;  for  he  should  have  kept  his  private  accounts 
elsewhere,  if  he  did  not  want  them  to  be  seen  (u). 
After  a  dissolution   new  books  are  generally   opened; 
but  if   they  relate  to  the   accounts   which  have  to  be 
taken,  they  must  be  produced  (x)  ;  and  even  if  a  part- 
ner not  before  the  Court,  objects  to  their  production, 
it  is  by  no  means  clear  that  his  objection  will  pre- 
vail (y).     As  between  partners  *  and  their  representa-  [*  538] 
tives,  material  documents  must  be  produced,  though  f  hoy 
may  be  privileged  as  between  them  and  other  persons  (z). 

If  a  partner  has  books  or  accounts  in  his  possession,  Consequence 
and  he  will  not  produce  them,  an  account  may,  never-  of  non-pro- 


duction. 


(s)  Morehouse  v.  Newton,  3  Be  G.  &  Sm.  307. 

(t)  This  rule  was  framed  on  15  &  16  Vict.  c.  86,  ?  54,  repealed 
by  46  &  47  Vict.  c.  49,  \  3.  See,  as  to  the  old  practice,  Rowley 
v.  Adams,  7  Beav.  395;  Millar  v.  Craig,  6  ib.  444;  Turner  v. 
Corney,  5  ib.  515;  Adley  v.  The  Whitstable  Co.,  17  Ves.  327. 
See  the  decree  in  Stainton  v.  The,  Carron  Co.,  24  Beav.  363.  Spe- 
cial directions  were  only  given  when  necessary.  See  Lodge  v. 
Prichard,  3  De  G.  Mac.  &  G.  906;  Ewart  v.  Williams,  7  ib.  68. 
The  Bankers'  Books  Evidence  Act,  42  &  43  Vict.  c.  11,  facili- 
tates the  procuring  of  evidence.  See  on  it,  Harding  v.  Williams, 
14  Ch.  D.  197  (which  query);  Be  Marshfield,  32  Ch.  D.  499, which 
was  varied  on  appeal;  Arnott  v.   Hayes.  36  Ch.  D.  731. 

(u)  Pickering  v.  Pickering,  25  Ch.  D.  247;  Toulmin  v.  Cop- 
land, 3  Y.  &  C.  Ex.  655;  Freeman  v.  Fairlie,  3  Mer.  43.  Lib- 
erty will  be  given  to  seal  up  those  parts  which  are  sworn  not  to 
relate  to  the  matters  in  question  in  the  suit,  ante,  p.  507. 

l'.r)  Hue  v.  Richards.  2  Beav.  305.     See  the  last  note. 

(y)  See  Freeman  v.  Fairlie.  3  Mer.  43.     But  see  ante,  p.  503. 
z)  See  Brown  v.  Perkins,  2  Ha.  540,  where  the  excuse  of  pro- 
fessional confidence  was  set  up. 

1  An  account  stated  by  a  partner  on  the  dissolution  of  the 
partnership,  admitting  his  indebtedness  to  the  firm  is  evidence 
against  him,  although  unsigned.  Jessup  v.  Cook,  6  N.  J.  L.  434 
(1798). 

*  16  LAW  OF   PARTNERSHIP. 


610 


ACTIONS  BETWEEN  PARTNERS. 


Bk.  III. 
Chap.  10. 

Sect.  6. 


Accountants. 


Injunctions 
and  re- 


[  *  539] 


theless,  be  arrived  at  by  presuming  everything  against 
him.  Thus,  in  a  case  where  an  account  was  directed 
at  the  suit  of  the  representatives  of  a  deceased  partner 
against  the  surviving  partner,  and  the  latter  would  not 
produce  the  books  necessary  to  enable  the  Master  to 
take  the  accounts,  the  Master  estimated  the  net  profits 
at  10Z.  per  cent,  on  the  capital  employed,  and  the  Court, 
on  exceptions  to  his  report,  confirmed  it,  adding  that  if 
he  had  set  the  net  profits  down  at  202.  per  cent,  his  re- 
port would  have  been  equally  confirmed  (a).1 

The  Court  has  power  to  employ  professional  account- 
ants to  assist  it  in  taking  accounts,  and  the  Court  may 
act  on  their  report  (6). 

2.    Of  injunctions. 

In  order  to  prevent  a  partner  from  acting  contrary  to 
the  agreement  into  which  he  may  have  entered  with  his 
co-partners,  or  contrary  to  the  good  faith  which,  inde- 
pendently of  any  agreement,  is  to  be  observed  by  one 
partner  towards  his  co-partner,  it  is  sometimes  neces- 
sary for  a  Court  to  interfere  either  by  granting  an  in- 
junction against  the  partner  complained  of,  or  by  tak- 
ing the  affairs  of  the  partnership  oat  of  the  hands  of 
all  the  partners,  and  entrusting  them  to  a  receiver  or 
receiver  and  manager  of  its  own  appointment. 

These  two  modes  of  interference  require  to  be  con- 
sidered separately;  for  they  are  not  had  recourse  to 
indiscriminately.  *  The  appointment  of  a  receiver,  it  is 
true,  always  operates  as  an  injunction,  for  the  Court- 
will  not  suffer  its  officer  to  be  interfered  *  with  by  any 
one(c);  but  it  by  no  means  follows  that  because  the 
Court  will  not  take  the  affairs  of  a  partnership  into  its 


(a)  Walmsley  v.  Walnrsley,  3  Jo.  &  Lat.  556;  and  see  Gray  v. 
Haig,  20  Beav.  219. 

(b)  See  Jud.  Act,  1873,  §  56.  57,  and  Ord.  xxxiii.  r.  2:  xl.  r. 
10;  lv.  r.  19;  and  see  Hill  r.  King,  1  N.  R.  341,  L.  C;  Ford  v. 
Tynte,  2  De  G.  J.  &  Sm.  127;  Be  London.  Birmingham,  and 
Bucks.  Rail.  Co.,  6  W.  R.  141.  As  to  production  to  account- 
ants, &c,  see  ante,  p.  504. 

(c)  See  Helmore  v.  Smith  (No.  2),  35  Ch.  D.  449.  However, 
the  Court  will  often  grant  an  injunction  as  well  as  a  receiver,  to 
mark  its  sense  of  the  impropriety  of  the  conduct  of  those  it  spe- 
cially restrains,  see  per  V.  -C.  Kindersley,  in  Evans  v.  Coventry, 
3  Drew.  82. 


1  If  the  partner  whose  duty  it  is  to  keep  the  hooks  of  the  firm 
does  it  so  carelessly  that  he  is  unable  to  give  an  account  of  pro- 
fits, he  can  be  charged  with  interest  at  least  iu  their  stead. 
Pearce  v.  Pearce,  77  111.  281  (1875). 


INJUNCTION  AGAINST  PARTNERS.  611 

own  hands,  it  will  not  restrain  some  one  or  more  of  the  Bk.  III. 
partners  from  doing  what  may  be  complained  of  (d).  ^\.    ' 
Whatever  donbt  there  may  formerly  have  been  upon 


the  subject,  it  is  clear  that   an  injunction  will  not  be  Injunction 

refused  simply  because  no  dissolution   of  partnership  gjjjjjj  no 

is  sought  (e).1     Where  a  partner  who  had  been  suffer-  ciiss<)lutioii 

ing  from  temporary  insanity  had  recovered,  but   was  is  sought. 

excluded  by  his  co  partners,  from  the  management  of  Restoring 

the  affairs  of  the  partnership,  the   Court  restored  him  excluded 

to  his  position  in  the  firm  by  granting  an  injunction  partner. 

restraining  the  other   partners    from  preventing  him 

from  transacting  the  business  of  the  partnership  (/). 

Again,  in  England  v.  Curling  (g),  a  partnership  had  Restraining 

been  entered  into,  for  a  term  of  years  which  had  not  ^groper 

expired.      One  of  the  partners  insisted  on  a  dissolution        ' 

.F  x  -  -,     .    ,      rmgianu  (. 

and  retired  from  the   partnership,    and  entered    into  Curiing. 

another  partnership,  which  assumed  the  name  of  the 
old  firm,  opened  the  letters  addressed  to  it,  and  circu- 
lated notice  of  its  dissolution.  But  on  a  bill  filed  by 
the  continuing  partners  of  the  old  firm  against  their 
co-partner  and  the  other  members  of  the  new  firm,  the 
Court  granted  an  injunction  restraining  the  retired  co- 
partner from  carrying  on  business  with  his  new  part- 
ners or  any  other  persons  except  his  old  co-partners, 
until  the  expiration  of  the  term  ;  and  restraining  his 
new  partners  from  carrying  on  business  with  him,  or 
otherwise,  in  the  name  of  the  old  firm,  and  from  re- 
ceiving or  opening  letters  addressed  to  it,  and  from 
interfering  with  its  property ;  and  restraining  the 
retired  partner  from  publishing  or  circulating  any 
notice  of  the  dissolution  of  the  old  firm,  before  the 
expiration  of  the  term  for  which  it  had  been  entered 
into. 

*  So  in  Hall  v.  Hall  (h),  a  partnership  for  twenty-one  ("  *  540] 
— Hall  v.  Hall. 

(rf)  See  Hall  v.  Hall,  3  Mac.  &  G.  85. 

(e)  See  Jud.  Act,  1873,  §  2.3,  cl.  8,  in  addition  to  the  cases 
below. 

(f)  Anon.,  Z.  v.  X.,  2  K.  &  J.  441. 

(g)  8  Beav,  129.     See,  too,  Warder  v.  Stilwell,  3  Jur.  N.  S.  9. 
(A)  12  Beav.  414,  20   ib.  139,  and  3  Mac.  &  G.  79.     See.  also, 

Blisset  v.  Daniel,  10  Ha.  493. 

1  Thus  a  partner  will  be  restrained  from  appropriating  the 
firm's  property  to  the  payment  of  separate  debts.  Stockdale  v. 
Ullery,  37  Pa.'  St.  486  (1860);  Converse  v.  McKee,  14  Texas.  20 
(1855);  or  from  misusing  it,  in  violation  of  the  articles.  New  v. 
Wright,  44  Miss.  202  (1870);  or  from  breaches  of  the  partnership 
articles.  Howell  v.  Harvey,  5  Ark.  270  (1843).  If  one  partner 
threaten  or  attempt  to  sell  the  assets  of  the  firm  in  fraud  pi  his 
associates,  he  will  be  restrained  bv  injunction.  Sloan  v.  Moore, 
37  Pa.  St.  217  (1860);  Halstead  v.  Shepard,  23  Ala.  558  (1853). 


612 


ACTIONS  BETWEEN  PARTNERS. 


Bk.  III. 
Chap.  10. 
Sect.  6. 


Clements  v. 
Norris. 


"Where  one 
partner  seeks 
to  drive  the 
others  to  a 
dissolution. 


Injunction 

where  the 
partnership 
is  determin- 
able at 
will. 


Glassington 
v.  Thwaites. 
[*541j 


years,  determinable  on  twelve  months'  notice  by  either 
party  (i),  was  entered  into  by  the  plaintiff  and  the 
defendant  ;  disputes  arose,  and  the  defendant  wholly 
excluded  the  plaintiff  from  the  partnership  business. 
TLe  plaintiff  hied  a  bill  praying  that  the  articles  might 
be  performed,  and,  amongst  other  things,  for  an  injunc- 
tion, but  not  for  a  dissolution.  An  injunction  was 
granted,  restraining  the  defendant  from  applying  any 
of  the  monies  and  effects  of  the  co-partnership,  other- 
wise than  in  the  ordinary  course  of  business,  and  from 
obstructing  or  interfering  with  the  plaintiff  in  the  exer- 
cise or  enjoyment  of  his  rights  under  the  partnership 
articles.1 

Again  in  Clements  Norris  (k),  a  partner  who  insisted 
on  carrying  on  a  branch  of  the  partnership  business 
against  the  will  of  his  co-partner  was  restrained  from 
so  doing.  The  lease  of  the  place  of  business  had  ex- 
pired and  the  plaintiff  declined  to  renew  it  or  to  concur 
in  taking  any  other  place. 

These  authorities  show  that  where  a  partnership  is 
not  determinable  at  will,  those  partners  who  are  de- 
sirous of  carrying  on  the  business  in  the  proper  way 
will  be  protected  by  the  Court  from  the  unwarranted 
acts  of  a  co-partner,  whose  only  object  may  be  to  force 
the  others  to  submit  to  him  or  to  agree  to  a  disso- 
lution (I). 

Where  the  partnership  is  determinable  at  will,  there 
is,  it  is  said,  more  difficulty  in  interfering  if  a  dissolu- 
tion is  not  sought  ;  for,  supposing  the  Court  to  in- 
terfere, the  defendant  may  immediately  dissolve  the 
partnership  (m).  But  supposing  him  to  do  so,  an  in- 
junction will  not  necessarily  be  futile,  inasmuch  as  so 
long  as  it  continues  in  force,  the  defendant  is  rendered 
powerless  for  evil,  and  a  notice  by  him  to  dissolve  the 
partnership  cannot,  per  se,  operate  as  a  dissolution  of 
the  injunction.  In  Glassington  v.  Thwaites  (n),  the 
plaintiff',  who  was  one  of  the  proprietors  of  the  Morn- 
ing Herald,  obtained  an  *  injunction  restraining  his 
co-partners  who  were  also  proprietors  of  the  English 

(i)  See  20  Beav.  139. 
(k)  8  Ch.  D.  129. 

(1)  See,  too,  Fairthorne  v.  Weston,  3  Hare,  387. 
(m)  See  Peacock  v.  Peacock,  16  Yes.  49;  Miles  v.  Thomas 
606. 

(n)  1  Sim.  &  Stu.  124. 


9  Sim. 


1  For  instance,  of  injunctions  in  the  case  of  an  excluded  part- 
ner see  Van  Keuren  v.  Trenton  Locomotive  Mfg.  Co.  13  N.  J.  Eq. 
302(1861);  Rutland  Marble  Co.  v.  Ripley,  10  Wall.  339(1870); 
Pirtle  v.  Penn,  3  Dana,  247  (1835). 


INJUNCTION  AGAINST  PARTNERS.  013 

Chronicle  (in  which,  however,  the  plaintiff  had  no  in-  Bk.  Ill, 
terest),  from  publishing  in  the  latter  paper  any  infor-  j^p*610; 
mation  obtained  at  the  expense  of  the  former  until  it * — '. 


should  have  been  first  published  in  the  Morning  Herald. 
So  in  Morris  v.  Caiman  (o),  one  of  the  proprietors  of  Morris  i 
the  Haymarket    Theatre  was  restrained    froro    acting  Column, 
contrary  to  the  articles  of  partnership,  by  writing  plays 
for  other  theatres.  Again,  where  a  partner  had  agreed  not  Homfray  r. 
to  sell  his  share  without  first  offering  it  to  the  other  part-  Fothergill. 
ners,  an  injunction  to  restrain  a  sale  was  granted  (p). 
It  does  not  appear  from  the  reports  of   these  cases 
whether  the  partnerships  were  partnerships  at  will  or 
not  ;  but  supposing  them  to  have  been  merely  partner- 
ships at  will,  it  is  clear  that  the  injunctions  were  far 
from  valueless. 

In  an  action  instituted  for  the  purpose  of  having  a  injunction 
partnership  dissolved,  or  of  having  an  account  taken  in  actions 
after  a  partnership  has  been  dissolved,  it  has  never  been  *°r  dissohi- 
doubted  that  an  injunction  will  be  granted  to  restrain 
one  of  the  partners  from  doing  any  act  which  will  im- 
pede the  winding  up  of  the  concern  (q).     For  example, 
one  partner  will  be  restrained  from  carrying  on  the  con 
cern  for  any  other  purpose  than  winding  up  (r)  ;  from 
damaging  the  value  of  the  good-will  if  it  ought  to  be 
sold  for  the  benefit  of  all  (s)  ;  from  getting  in  the  assets 
if  he  is  likely  to  misapply  them  (t)  ;  a  surviving  part- 
ner will  be  restrained  from  improperly  ejecting  the  rep- 
resentatives of  his  deceased  co-partner  (u)  :  and  they, 
on  the  other  hand,  will  be  restrained  from  making  any 
improper  use  of  partnership  property,  the  legal  estate 
of  which  may  happen  to  be  in  them  (x).1     *  So  a  sur-  [  *  542] 
viving  partner  will  be  restrained  from  disposing  of  or  get- 

(o)  18  Ves.  437. 

(p)  Homfrey  v.  Fothergill,  1  Eq.  567. 

(q)  A  person  who  only  shares  profits  is  by  no  means  necessarily 
in  the  same  position  as  a  partner  in  these  respects,  see  Walker 
v.  Hirsch,  27  Ch.  D.  460. 

(r)  See  De  Tastet  v.  Bordenave,  Jac.  516. 

(s)  Turner  v.  Major,  3  Gift.  442;  Bradbury  v.  Dickens,  27Beav. 
53.  In  the  last  case  the  defendant  was  advertising  the  discon- 
tinuance of  a  partnership  perodical  of  which  he  was  the  editor. 

(0  O'Brien  v.  Cooke,  Ir.  Rep.  5  Eq.  51;  there  the  plaintiff  was 
allowed  to  get  them  in,  indemnifying  the  defendant  against 
costs,  &c. 

(u)  Elliot  v.  Brown,  3  Swanst.  489,  n.;  Hawkins  v.  Hawkins, 
4  Jur.  N.  S.  1045. 

(a,-)  Alder  v.  Fouracre,  3  Swanst.  489. 

1  A  partner  will  be  restrained  from  publishing  letters  received 
from  his  co-partner  in  regard  to  the  firm's  business.  Roberts  v. 
McKee,  29  Ga.  161  (1859.) 


614 


ACTIONS  BETWEEN  PARTNERS. 


Bk.  III. 
Chap.  10. 

Sect.  6. 


Injunction 
to  protect 
partners 
from  the 
representa- 
tives of  a 
co-partner. 
Injunction 
to  enforce 
[  *  543] 
special  agree- 
ments. 


ting  in  the  partnership  assets,  if  he  has  already  been 
guilty  of  breaches  of  trust  with  reference  to  them  (y). 
But  a  surviving  partner  will  not  be  restrained  from  con- 
tinuing to  carry  on  business  in  the  name  of  himself  and 
his  deceased  co-partner  unless  so  to  do  is  contrary  to 
his  own  agreement,  or  the  good-will  is  a  saleable  asset 
of  the  iirin  (z).  Again,  in  an  action  for  a  dissolution, 
a  partner  will  be  restrained  from  improperly  interfer- 
ing with  or  obstructing  the  partnership  business  (a)  ; 
from  drawing,  accepting,  or  endorsing  bills  of  exchange 
in  the  partnership  name  for  other  than  partnership  pur- 
poses (b)  :  from  getting  in  debts  owing  to  the  firm  (c); 
from  withholding  the  partnership  books  (d)  ;  and  gen- 
erally on  a  dissolution  one  partner  will  be  restrained 
from  injuring  the  property  of  the  firm  (e). 

So  the  Court  will  interfere  by  injunction  to  protect 
partners  from  interference  of  persons  claiming  the 
share  of  a  late  co-partner,  by  reason  of  his  death,  or 
bankruptcy,  or  under  an  execution  (/). 

So  after  a  dissolution  the  Court  constantly  interferes 
by  injunction  to  restrain  breaches  of  special  agreements 
entered  into  between  the  partners  ;  such  for  example 
as  agreements  *not  to  carry  on  business  (g),  not  to  get 
in  debts  of  the  firm  (h),  not  to  divulge  a  trade  secret  (i). 
So,  if  a  partner  retires,  and  assigns  his  interest  in  the 
partnership,  and  in  the  good-will  thereof,  to   the  con- 


(y)  Hartz  v.  Schrader,  8  Ves.  317. 

(z)  See  on  this  subject,  ante,  pp.  4:17,  448. 

(a)  Smith  v.  Jeves,  4  Beav.  503;  Charlton  v.  Poulter,  19  Yes. 
148.  n. 

(b)  Williams  v.  Bingley,  2  Vera.  278,  note,  and  Coll.  Part.  233; 
Jervis  v.  White,  7  Ves.  412;  Hood  v.  Aston,  1  Russ.  412.  In  the 
two  last  cases,  the  injunction  restrained  maid  fide  indorsees  for 
value  from  parting  with  or  negotiating  the  securities. 

(c)  Head  v.  Bowers,  4  Bro.  C.  C.  441. 

(d)  Taylor  v.  Davis,  3  Beav.  388,  note;  Greatrex  v.  Greatrex, 
1  De  G.  &  Sm.  692;  Charlton  v.  Poulter,  19  Ves.   148,  n. 

(e)  See  Marshall  v.  Watson,  25  Beav.  501,  where  an  injunction 
to  restrain  a  partner  from  publishing  the  accounts  of  the  firm, 
was  under  special  circumstances  refused.  See,  also,  as  to  mak- 
ing slanderous  statements  and  diverting  letters,  Hermann  Loog 
v.  Bean,  26  Ch.  D.  306,  a  case  of  agency,  but  applicable  to  part- 
nerships. 

(/)  See  as  to  assignees  in  bankruptcy.  Allen  v.  Kilbee.  4  Madd. 
464;  Fraser  v.  Kershaw,  2  K.  &  J.  496:  Davidson  v.  Napier,  1 
Sim.  297;  Freeland  v.  Stansfield,  2  Sm.  <x  G.  479.  As  to  sheriffs, 
Be  van  v.  Lews,  1  Sim.  376;  Newell  v.  Townsend,  6  ib.  419.  and 
ante,  p.  356  et  seq.  As  to  executors,  Phillips  v.  Atkinson,  2  Bro. 
C.  C.  272. 

(g)  Whittaker  ».  Howe.  3  Beav.  383. 

(h)  Davis  v.  Amer,  3  Drew.  64. 

(i)  Morrison  v.  Moat,  9  Ha.  241. 


INJUNCTION  AGAINST  PARTNERS.  615 

tinning  partners,   he  will   be  restrained   from  recom-  Bk.  III. 
mencing  or  carrying  on  business  in  such   a  way  as  to  ^  lp'6 

lead  people  to  suppose  that  he  is  the  successor  of  or ! — ! 

still  connected  with  the  old  firm  (k). 

Although  injunctions  to  restrain    actions    are    now  injunction  to 
abolished,  it  may  be  useful  to  observe  that  where  sur-  restrain 
viving  partners  gave  the  executors  of  their  late  part-  f,ctl°us  on_, 
ner  a  bond  for  the  amount  of  his  share,  the  amount  of  ol-  UnSettled 
which  had  not  been  ascertained,  an  action  on  the  bond  accounts, 
was  stayed  on  its  being  shown  that  if  the  partnership 
accounts  were  taken  it  would  appear  that  the  surviving 
partners  had  already  paid  too  much  (I).     But  an  action 
for  the  balance  of  a  settled  account  would  not  be  re- 
strained merely  because  there  were  other  unsettled  ac- 
counts between  the  parties  (ra);  nor  would  a  court  of 
equity  interfere  to  prevent  a  shareholder  of  a  company 
who  was  a  creditor  of  that  company  from  executing  a 
judgment  obtained  against  it  by  him  as  a  creditor  (n). 

Before  leaving  this  subject,  it  is  necessary  to  make  a  injunction  in 
few  observations  on  the  kind  of  misconduct  which  will  case  of 
induce  the  Court  to  grant  an  injunction  against  one  misconduct, 
partner  at  the  suit  of  another.     Mere  squabbles  and  im- 
proprieties arising  from  infirmaties  of  temper,  are  not 
considered  sufficient  ground  for  an  injunction  (o) ;  but  if 
one  partner  excludes  his  co-partner  from  him  his  right- 
ful interference  in  the  management  of  the  partnership 
affairs,  or  if  he  presists  in  acting  in  violation  of  the 
*  partnership  articles  on  any  point  of  importance,  or  so  [  *  544] 
grossly  misconducts  himself  as  to  render  it  impossible 
for  the  business  to  be  carried  on  in  a  proper  manner, 
the  Court  will  interfere  for  the  protection  of  the  other 
partners  (p).     Where,  however,  the  partner  complain- 
ed of  has  by  agreement  been  constituted    the    active 
managing  partner,  the  Court  will  not  interfere  with  him 

(A)  Churton  v.  Douglas,  Johns.  174,  ante,  p.  441.  See,  also, 
Hookham  v.  Pottage,  8  Ch.  91,  and  Hermann  Loog  v.  Bean,  26 
Ch.  D.  306,  as  to  making  injurious  statements. 

(/)  Jackson  v.  Sedgwick,  1  Swanat.  460.  See,  also,  Gold  v. 
Canham,  1  Ch.  Ca,  311,  and  2  Swanst.  325,  note. 

(m)  See  Preston  v.  Strutton,  1  Ans.  50,  and Rawson v.  Samuel, 
Cr.  &  Ph.  172. 

(ra)  Rheam  u.  Smith,  2  Ph.  726;  Hardinge  v.  Webster,  1  Dr. 
&  Sm.  101  ;  and  see  Hammond  v.  Ward,  3  Drew.  103. 

(»)  See  Marshall  v.  Colman,  2  J.  &  W.  260  ;  Smith  v.  Jeyes,  4 
Beav.  503  ;  Lawson  v.  Morgan,  1  Price,  307  ;  Cotton  r.  Horner, 
5  Price,  537;  Warder  v.  Stillwell,  3  Jur.  N.  S.  9. 

(p)  Seejjo.sf,  book  iv.  ch.  1,  §2.  In  Anderson  v.  Wallace,  2 
Moll.  510,  one  of  several  partners  who  horsed  a  mail  coach  was 
restrained  from  horsing  it  on  the  ground  that  he  did  it  so  badly 
as  to  imperil  the  business  of  the  concern. 


616 


ACTIONS  BETWEEN  PARTNERS. 


Bk.  III. 
Chap.  10. 
Sect.  6. 


Partner 
applying  for 

injunction 
must  come 
with  clean 
hands. 


Injunction 
to  restrain 
holding  out. 


unless  a  strong  case  be  made  out  against  him  (q);  nor 
will  the  Court  restrain  a  partner  from  acting  as  such, 
merely  because  if  he  is  known  so  to  do,  the  confidence 
placed  in  the  firm  by  the  public  will  be  shaken  (r), 

It  need  scarcely  be  observed  that  a  partner  who  seeks 
an  injunction  against  his  co- partner  must  himself  be 
able  and  willing  to  perform  his  own  part  of  any  agree- 
ment which  he  seeks  to  restrain  his  co-partner  from 
breaking  (s);  and  the  plaintiff's  own  misconduct  may 
be  a  complete  bar  to  his  application,  however  wrong 
the  defendant's  conduct  may  have  been  (t).  As  stated 
by  Lord  Eldon  in  Const  v.  Harris,  a  partner  who  com- 
plains that  his  co  partners  do  not  do  their  duty  to 
him,  must  be  ready  at  all  times,  and  offer  to  do  his  duty 
to  them  (u). 

In  consequence  of  the  liability  which  attaches  to  a 
person  who  holds  himself  out  as  a  partner  with  others, 
and  of  the  danger  run  by  a  person  who  is  held  out  as  a 
partner  with  others,  even  although  it  may  not  be  with 
his  consent,  a  Court  will,  it  seems,  interfere  andrestrain 
a  person  from  holding  out  another  as  partner  with 
him,  without  the  authority  of  that  other  (x). 


[*545] 

Object  of 
having  a 
receiver, 

and  manager. 


*3.   Of  receivers. 

The  object  of  having  a  receiver  appointed  by  the 
Court  is  to  place  the  partnership  assets  under  the  pro- 
tection of  the  Court,  and  to  prevent  everybody,  except 
the  officer  of  the  Court,  from  in  any  way  intermeddling 
with  them.1  The  object  of  having  a  manager  is  to  have 
the  partnership  business  carried  on  under  the  direction 

(q)  See  Lawson  v.  Morgan,  1  Price,  303  ;  Waters  v.  Taylor,  15 
Ves.  10.     See,  also,  Walker  v.  Hirsch,  27  Ch.  D.  460. 

(r)  Anon..  2  K.  &  J.  441. 

(s)  Smith  v.  Fromont,  2  Swanst.  330. 

(t)  Littlewood  v.  Caldwell,  11  Price,  97,  where  an  injunction 
was  refused,  because  the  plaintiff  had  taken  away  the  partner- 
ship books. 

(■»)  Const  v.  Harris,  T.  &  R.  524. 

(x)  See  Routh  v.  Webster,  10  Beav.  561  ;  Bullock  v.  Chapman, 
2  De  G.  &  Sm.  211  ;  Troughton  v.  Hunter,  18  Beav.  470.  Com- 
pare Banks  v.  Gibson,  34  Beav.  566.  In  Dixon  v.  Holden,  7  Eq. 
488.  an  injunction  was  granted  to  restrain  the  publication  of  a 
statement  that  the  plaintiff  was  a  member  of  a  bankrupt  firm. 

1  Upon  giving  satisfactory  security  that  he  will  pay  his  co-part- 
ner his  share  in  the  firm  assets,  a  partner  who  has  possession  of 
them  has  been  left  in  charge,  where  lie  had  contributed  the  greater 
part  of  the  capital  and  the  appointment  of  a  receiver  would  in- 
jure the  busiuess.  Delo  r.  Banks.  101  Pa.  St.  458  (1882);  Pop- 
per v.  Scheider,  38  How.  Pr.  34  (1869). 


RECEIVER.  617 

of  the  Court,  a  receiver,   unless  he  is   also  appointed  Bk.  III. 
manager,  has  no  power  to  carry  on  the  business.  SecT  6 

Courts  of  Justice  are  by   no  means  anxious  to  take  k 


upon  themselves  the  management  of  a  partnership  busi-  Receivers  in 
ness,  and  they  will,  it  is  said,  never  do  so,  save  with  a  l^£™  *ot 
view  to  a  dissolution  or  final  winding  up  of  the  affairs  dissolution. 
of  the  concern.     In  the  well-known  case  of   Const  v.  Qonst  y< 
Harris  (y),  Lord  Eldon  intimated  that  a  receiver  might  Harris, 
be  appointed  in  a  suit  where  a  decree  could  be  made  for 
carrying  on  the   concern  according   to   some    specific 
agreement  between  the  parties,  as  well  as  in  a  suit  for 
a  dissolution  and  winding  up;  and  in  that  very  case  a 
receiver  was  appointed,   although  no  dissolution    was 
prayed  by  the  bill.      The  receiver  there  appointed  was,  Receiver  and 
however,  in  no  sense  a  manager,  but  merely  a  person  manager, 
nominated  to  receive  money  coming  in  from  certain 
quarters,  and  to  apply  it  in  the  manner  agreed  upon  in 
the  partnership  articles.     If  the  appointment  of  a  re- 
ceiver does  not  involve  the  appointment  of  a  manager, 
Const  v.  Harris  is  a  clear  authority  to  show  that  a  re- 
ceiver may  be  obtained  in  an  action  not  seeking  a  dis- 
solution of  the  partnership;  the  later  cases  are  not  op- 
posed to  this.     But  the  writer  is  not  aware  of  any  in- 
stance in  which  an  action  or  suit  has  been  instituted  for 
the  purpose  of  continuing  a  partnership,  and  in  which  the 
Court  has  appointed  a  receiver   and  manager;  and  in 
Hall  v.  Hall  (z)  Lord  Cottenham  decided  that  in  such 
a  suit  no  such  appointment  could  be  made.     Roberts  v.  ™o1>e^ts^: 
Eberharolt  (a)  is  to  the  same  effect.     There  the  ^plaintiff  ,  #  k^ci 
and  the  defendants  were  partners  in  a  colliery,  the  plain-  "- 
tifP  being  the  managing   partner.     Disputes  arose  be- 
tween the  plaintiff  and  the  defendant,  and  the  former 
filed  a  bill  for  an  account  and  a  receiver,   but  did  not 
ask  for  a  dissolution.     The  Vice-Chancellor,  on   a  mo- 
tion by  the  plaintiff  for  a  receiver,  refused  the  motion 
on  the  ground  that  the  object  of  the  suit  was  to  insure 
a  continuance  of  the  partnership,  and  not  to  bring  it  to 
a  close.     As  was  said  by   Lord   Eldon,  the  Court  will 
not,  by  appointing  receivers,  take  upon  itself  the  man- 
agement of  every  trade  in  the  kingdom;  nor  will  it  take 
upon  itself  the  management  of  any  partnership  busi- 
ness, save  with  a  view  to  its  final  winding  up  (b).1 

(y)  Turn.  &  R.  517.  See,  further,  as  to  managers  as  distin- 
guished from  receivers,  Gardner  v.  Lond.  Chat,  and  Dover  Rail. 
Co.,  2  Ch.  201 ;  Be  Manchester  and  Milford  Rail.  Co.,  14  Ch.  D.  653. 

(z)  ?,  Mac.  &  G.  79.  (a)  Kay,  148. 

(b)  See  Goodman  v.  Whitcomb,  1  Jac.  &  W.  589;  Harrison  v. 

1  It  must  appear  that  there  is  a  right  to  a  dissolution  and  wind 


618 


ACTIONS  BETWEEN  PARTNERS. 


Bk.  III. 

Chap.  10. 
Sect   6. 

Receiver  not 

refused 
because  no 
dissolution  is 
prayed. 


Sheppard  v. 
Oxeniord. 


Evans  v. 
Coventry. 
[  *  547] 


The  Judicature  Act,  1873,  s.  25,  cl.  8,  may  perhaps 
render  it  easier  than  formerly  to  obtain  a  receiver  in 
partnership  actions;  but  this  has  not  yet  been  decided. 

It  is  not,  however,  necessary,  in  order  to  induce  the 
Court  to  interfere,  that  the  plaintiff  should  in  his  ac- 
tion expressly  ask  for  a  dissolution:  for  the  Court  will 
entertain  an  application  for  a  receiver  if  the  object  of  the 
action  is  to  wind  up  the  partnership  affairs,  and  the  ap- 
pointment of  a  receiver  and  manager  is  sought  with  that 
view.  Thus,  in  Shf2^pard  v.  Oxenford  (c),  which  has 
been  already  referred  to,  the  Court  granted  an  injunc- 
tion and  appointed  a  receiver  and  manager  (d).  No 
dissolution  was  expressly  asked  for,  but  the  whole  ob- 
ject of  the  suit  evidently  was  to  wind  up  the  company, 
and  have  its  assets  applied  in  liquidation  of  its  liabilities. 

Again,  in  Evans  v.  Coventry  (e),  the  members  of  two 
societies,  or  rather  it  would  seem  of  one  society,  hav- 
ing two  branches  of  *  business,  viz.,  a  loan  branch,  and 
an  insurance  branch,  filed  a  bill  for  the  purpose  of  hav- 
ing the  funds  of  the  societies  made  good  by  the  default- 
ing directors,  and  of  having  the  accounts  investigated, 
the  affairs  of  the  societies  wound  up  if  necessary,  and 
their  assets  in  the  meantime  protected  by  the  appoint- 
ment of  a  manager  and  receiver.  It  was  proved  that 
some  of  the  funds  had  already  been  made  away  with  by 
the  secretary;  and  a  manager  and  receiver  was  appointed 
to  protect  what  remained  until  the  hearing  of  the  cause, 
upon  the  ground  that  the  plaintiffs  had  an  interest  in 
the  funds  in  question,  and  that  those  funds  were  in 
danger  of  being  lost. 

Arinitage,  4  Madd.  14:3;  Hall  v.  Hall,  3  Mac.  &  G.  79;  Smith  v. 
Jeyes,  4  Beav.  503;  Waters  v.  Taylor.  15  Ves.  10;  Oliver?;.  Hamil- 
ton, 2  Anstr.  453.  In  Morris  r.  Colman,  18  Ves.  438,  there  was 
a  reference  for  the  appointment  of  a  manager. 

(c)  1  K.  &  J.  491,  ante,  pp.  499,  500. 

(d)  A  receiver  and  manager  was  appointed  in  this  country,  and 
the  defendant,  who  had  gone  to  the  Brazils  after  the  bill  had  been 
filed,  was  appointed  receiver  and  manager  out  there.1 

(e)  5  De  G.  M.  &  G.  911,  reversing  S.  C,  3  Drew.  75.  It  does 
not  appear  very  distinctly  what  the  manager,  as  distinguished 
from  the  receiver,  was  expected  to  do.  The  Vice-Chancellor  re- 
fused the  motion  mainly  upon  the  ground  that  he  could  not  take 
upon  himself  the  management  of  such  societies,  even  until  the 
hearing  of  the  cause.  The  Court  of  Appeal  did  not  allude  to 
this. 


ing  up  before  a  receiver  will  be  appointed.  Serghorntner  v. 
Weissenborn,  20  N.  J.  Eq.  172  (1869);  Garretson  v.  Weaver,  3 
Edw.  Ch.  385  (1840). 

1  In  Harvey  v.  Varney,  104  Mass.  436  1,1870),  the  court  refused 
to  appoint  a  receiver  to  take  possession  of  assets  lying  in  a  for- 
eign j  urisdiction. 


RECEIVER. 


619 


It  has  been  already  remarked,  that  in  granting  or  re-  Bk.  III. 
fusing  an  order  for  a  receiver  the  Court  does  not  act  on  gecatp'6    - 
the  same  principles  as  when  it  grants  or  refuses  an  or- 


der for   an   injunction;  it   being  one  thing  to   manage  Difference 
the  affairs  of  a  partnership  oneself,  and  another  to  pre-  ™[fnng  an 
vent  a  person  who  has  already  misconducted   himself  fnjuncti0n 
from    interfering    further   with   the   partnership    con-  and  appoint- 
cerns  (/).     Another  reason  for  drawing  a  distinction  ing  a 
between  an  injunction  and  a  receiver  is,  that  whilst  an  reviver, 
injunction  excludes  only  the  person  against  Avhom  it  is 
granted,  the  appointment  of  a  receiver  excludes  all  the 
partners  from  taking  part  in   the  management  of   the 
concern.     It,  therefore,   does  not  follow  that  because 
the  Court  will  grant  an  injunction,  it  will  also  appoint 
a  receiver;  nor  that  because  it  refuses  to  appoint  a  re- 
ceiver, it  will  also  decline  to  interfere  by  injunction  (g). 

In  considering  the  right  to  the  appointment  of  a  re-  Right  to  a 
ceiver  in  actions  for  a  dissolution  or  winding  up,  it  is  receiver, 
necessary  to  distinguish  cases  in  which  there  is  a  con- 
test between  partners,  or  late  partners,  from  those  in 
which  the  contest  is  between  partners  or  late  partners 
on  the  one  side,  and  non-partners  on  the  other. 

"Where  one  partner    seeks  to    have  a  receiver  ap-  1.  As  between 
pointed  against  his  co-partners,  the  first  thing  to  ascer-  partners, 
tain  is,  whether  the  partnership  between  them  is   still 
subsisting,  or  has  been  already  dissolved;  for  if  it  is 
still  subsisting  no  receiver  will  be  appointed  unless 
some  special   grounds  for  the    appointment  **  can  be[*548j 
shown  (h),  or  unless  it  is  plain  that  an  order  for  a  dis- 
solution will  be  made  (i);1  whilst  if  the  partnership 
is  already  dissolved,  the  Court  usually  appoints  a  re-  After  a  disso- 
ceiver,  almost  as  a  matter  of  course  (A;).2     Id  the  case  ration, 
supposed,  the  common  property  has  to  be  applied  in 

(/)  See  Hall  v.  Hall,  3  Mac.  &  G.  85  ;  and  ante,  p.  539. 

\g)  Although  an  injunction  was  granted,  a  receiver  was  re- 
fused, in  Read  v.  Bowers,  4  Bro.  C.  C.  441  ;  Hartz  v.  Schrader,  8 
Ves.  317  ;  Hall  v.  Hall,  12  Beav.  414,  and  3  Mac.  &  G.  79. 

(A)  See  infra,  p.  550. 

(i)  Goodman  v.  Whitcornb,  1  Jac.  &  W.  592. 

(k)  See  the  last  note,  and  Thomson  v.  Anderson,  9  Eq.  5o3  ; 
Sargent  v.  Read,  1  Ch.  D.  600,  where  both  plaintiff  and  defend- 
ant applied  for  a  receiver.  But  see  per  Lord  Eldon  in  Harding 
v.  Glover,  18  Ves.  281,  in  which  he  disavowed  the  principle  that 
a  dissolution  was  a  sufficient  ground  for  a  receiver. 

1  See  Serghorntner  v.  Weissenborn,  20  N.  J.  Eq.  172  (18G9)  ; 
Garretson  v.  Weaver,  3  Edw.  Ch.   385  (1840). 

2  There  must  be  some  imperative  reason,  like  breach  ot  duty 
or  contract.  Bufkin  v.  Boyce,  W4  1ml.  53  (1885);  Morey  v. 
Grant,  48  Mich.  326  (1882)  ;  Fitchter  v.  Fitchter,  11  N.  J.  Eq. 
71  (1855)  ;  Heflebower  v.  Buck,  04  Md.  15  (1880). 


620  ACTIONS  BETWEEN  PARTNERS. 


Bk.  III.  paying  the  partnership  debts,  and  has  to  be  divided 

Chap.  10.        amongst  the  partners;  and  each  partner  has  as  much 
t-  right  as  the  others  to  wind  up  the  partnership  affairs. 

Their  position  is,  therefore,  essentially  different  from 
that  of  mere  co-owners,  between  whom  courts  decline 
to  interfere  by  appointing  a  receiver,  except  under 
special  circumstances  (I). 
2.  As  between  When  the  contest  as  to  a  receiver  arises 'between  a 
partners  and  partner  on  the  one  hand,  and  the  executors,  adminis- 
non-partners.  Gators,  or  assigns  of  a  late  co-partner  on  the  other,  the 
first  thing  to  be  considered  is,  whether  the  person 
sought  to  be  excluded  from  interference  is  a  partner  or 
not.  For  whilst  the  Court  is  reluctant  to  exclude  a 
partner  from  the  management  of  the  partnership  af- 
fairs, it  will  readily  interfere  to  prevent  other  persons 
from  intermeddling  therewith.  The  reason  given  for 
this  is,  that  each  partner  is  at  the  outset  trusted  by  his 
co-partners,  and  has  confidence  reposed  by  them  in 
him;  and  until  it  can  be  shown  that  he  ought  not  to  be 
allowed  to  take  part  any  longer  in  the  management  of 
the  partnership  affairs,  the  Court  will  not  interfere  with 
him.  But  this  reasoning  has  no  application  to  persons 
who  acquire  an  interest  in  the  partnership  assets  by 
events  over  which  the  partners  have  no  control,  e.g., 
the  death  or  bankruptcy  of  one  of  the  members  of  the 
firm.  Whilst,  therefore,  even  in  an  action  for  a  disso- 
lution, or  winding  up,  a  receiver  will  not  be  granted 
against  a*  member  of  the  firm  at  the  instance  of  the 
executors,  administrators,  or  assigns  of  a  late  partner, 
unless  some  special  grounds  for  the  interference  of  the 
[*549]  Court  can  be  established  (to);1  it  is  a  matter  *  of 
course  to  appoint  a  receiver  where  all  the  partners  are 
dead,  and  an  action  is  pending  between  their  represen- 
tatives (n);  or  where  such  appointment  is  sought  by  a 
partner  against  the  representatives  of  his  late  co-part- 
Fraser  v.  ner  (o).  Fraser  v.  Kershaw  (p)  is  a  good  illustration 
Kershaw.        0f  ^[B  <}octrine.      There  one  partner  had  become  bank- 

(l)  See  ante,  p.  56  ct  seq. 

(m)  Collins  r.  Young,  1  Macqueen.  385,  and  see  Harding  v. 
Glover,  18  Ves.  281  ;  Kershaw  v.  Matthews,  2  Russ.  62  ;  Ken- 
nedy v.  Lee,  3  Mer.  448  ;  Lawson  v.  Morgan,  1  Price,  303.  For 
similar  reasons  the  Court  of  Probate  will  not  appoint  a  receiver 
pendente  lite  against  a  surviving  partner  unless  under  very  spe- 
cial circumstances.     Horrell  v.  Witts,  L.  R.  1  Pr.  &  Div.  103. 

(n)  Philips  v.  Atkinson.  2  Bro.  C.   C.  272. 

(o)  Freehold  v.  Stansfeld,  2  Sin.  &  G.  479. 

(p)  2  K.  &  J.  496. 

1  Higsjinson  r.  Air,  1  Desaus,  427  (1795)  ;  Barry  v.  Briggs,  22 
Mich.  201  (1871)  ;  Heflebower  v.  Buck,  64  Md.  15  (1880). 


RECEIVER.  621 

rupt  ;  the  share  of  the  other  partner  had  been  taken  in  Bk.  III. 
execution  under  a  fi.  fa.  for  a  separate  debt,  and  had  £~aJ)'fi 

been  assigned  to  his  creditor  by  the  sheriff.     The  credit- \ ! 

or,  as  the  assignee  from  the  sheriff  of  all  the  share  and 
interest  of  the  non-bankrupt  partner,  claimed  the  right 
of  winding  up  the  affairs  of  the  partnership,  and  to  ex- 
clude the  assignees  of  the  bankrupt  partner  from  inter- 
fering. But  on  a  bill  tiled  by  them  against  the  judg- 
ment creditor,  the  Court  granted  an  injunction,  and  ap- 
pointed a  receiver,  holding  that  the  right  of  the  non- 
bankrupt  partner  to  wind  up  the  affairs  of  the  partner- 
ship was  personal  to  himself,  and  was  incapable  of 
transfer,  and  did  not,  therefore,  pass  with  his  share  and 
interest  in  the  partnership  assets  (q). 

In  those  cases  in  which  special  grounds  for  the  ap-  influence  of 
pointment  of  a  receiver  must  be  shown,  it  follows  that  the  number 
in  a  firm  of  several  members  there  is  more  difficulty  in  ot  partners 
obtaining  a  receiver  than  in  a  firm  of  two.     For  the  ap-  appointment 
pointment  of  a  receiver,  operating  in  fact  as  an  injunc-  0f  a  receiver, 
tion  against  all  the   members,   there  must    be    some 
ground  for  excluding  all   who  oppose  the  application. 
If  the  object  is  to  exclude  some  or  one  only  from  inter- 
meddling, the  appropriate  remedy  is  rather  by  an  in- 
junction than  by  a  receiver  (r). 

Before  the  Judicature  acts  it  was  not  the  practice  to  Defendant 
appoint  a  receiver  at  the  instance  of  a  defendant  before  now  entitled 
decree  (s).     If  *  he  desired  to  apply  for  a  receiver  be-  *°* ~Qejver' 
fore  decree,  he  had  to  file  a  cross  bill.     But  this  is  now  L 
unnecessary  (t). 

The  grounds  on  which  the  Court  is  usually  asked  to  Grounds  for 
appoint  a  receiver  before  dissolution,  are  either  because,  the  appoint- 

bv  agreement,  the  partners  have  divested  themselves  men.  °  a 

j      o  '  x  m  receiver 

more  or  less  of  their  right  to  wind  up  the  affairs  of  the  ao-amst  a 
concern  ;  or  because,  by  misconduct,  the  right  of  per   partner, 
sonal  intervention  has  been  forfeited,  and  the  partner- 
ship funds  are  in  danger  of  being  lost. 

As  an  illustration  of  an  appointment  of  a  receiver,  Agreement, 
grounded  on  an   express   agreement,  reference  may  be  pavjs  r_ 
made  to  Dtiris  v.  Amer  (u).     There  the  plaintiff  and  Amer. 
the  defendant,  on  dissolving  partnership,  appointed   a 

(q)  See,  too,  Candler  v.  Candler,  Jac.  225,  where  a  receiver  was 
granted  against  the  assignee  of  partnership  debts. 

(r)  See  Hall  v.  Hall,  3  Mac.  &  G.  79. 

(n)   Robinson  r.  Hadley,  11  Beav.  614. 

(/)  See  Ord.  xix.  r.  3,  and  Ord.  1.  r.  6.  Sargantr.  Read,  1  Ch. 
D.  600. 

(m)  3  Drew.  64.  See,  too,  Turner  v.  Major,  3  Giff.  442,  a 
somewhat  similar  case.  No  receiver,  however,  appears  to  have 
been  appointed.     An  injunction  was  sufficient. 


622 


ACTIONS  BETWEEN  PARTNERS. 


Ek.  III. 
Chap.  10. 
Sect.  6  . 


Misconduct. 


[*551] 

Keceiver 
appointed. 


stranger  to  get  in  the  assets  of  the  firm,  and  agreed 
not  to  interfere  with  him.  After  this  agreement  had 
been  partially  acted  on,  one  of  the  partners  died,  and 
disputes  arising  between  the  executors  of  the  deceased 
partner  and  the  surviving  partner,  the  latter  proceeded 
to  get  in  the  debts  of  the  firm,  in  violation  of  the 
agreement.  On  a  bill  filed  by  the  executors  of  the  de- 
ceased partner  for  an  account,  and  for  an  injunction 
and  a  receiver,  the  Court,  on  motion,  appointed  a  re- 
ceiver, but  declined  to  grant  an  express  injunction,  on 
the  ground  that  there  was  no  sufficient  impropriety  of 
conduct  on  the  part  of  the  defendant  to  render  such  an 
order  necessary  (x). 

With  respect  to  misconduct,  the  observations  which 
have  been  already  made  on  this  head,  when  speaking  of 
injunctions  might  be  here  repeated  (y).  If  the  part- 
nership is  not  yet  dissolved  (z),  there  must  be  some- 
thing more  than  a  partnership  squabble  ;l  the  due 
winding  up  of  the  affairs  of  the  concern  must  be  en- 
dangered to  induce  the  Court  to  appoint  a  receiver  of 
its  assets  ;  and  non-co-operation  of  one  partner,  where- 
by the  whole  responsibility  of  management  is  thrown 
on  his  co-partner,  is  not  sufficient  (a).2 

*  Where,  however,  a  partner  has  so  misconducted  him- 
self as  to  show  that  he  is  no  longer  to  be  trusted,  as, 
for  example,  if  one  partner  colludes  with  the  debtors 
of  the  firm,  and  allows  them  to  delay  paying  their 
debts  (6);  or  carries  on  trade  on  his  own  account  with 
the  partnership  property  (c);  or,  the  partnership  prop- 
erty being  abroad,  runs  off  in  order  to  do  what  he  likes 
with  it  there  (d);  or,  if  a  surviving  partner  insists  on 
carrying  on  the  business,  and  employing  therein  the 
assets  of  his  deceased  partner  (e);  or  if  there  is   such 


(x)  See  ante,  p.  539,  note  (e). 

(y)  Ante,  p.  543. 

\z)  See<rn/e,  p.  548,  as  to  dissolved  partnerships. 

(«)  See  Roberts  v.  Eberhardt,  Kay.  148,  and  Kowe  v.  "Wood,  2 
J.  &  W.  556,  where  one  partner  declined  to  advance,  more  money 
to  work  a  mine. 

(b  Estwick  v.  Conningsby,  1  Vern.  118. 

(c)  Harding  v.  Glover;  18  Ves.  281. 

(d)  Sheppard  v.  Oxenford,  1  K.  &  J.  491. 

(e)  Madgwick  v.  Wimble,  6  Beay.  495. 


1  Sloan  r.  Moore,  37  Pa.  St.  217  (1860);  McElvey  v.  Lewis,  76 
N.  Y.  373  (1879);  Loomis  p.  MeKenzie,  31  Iowa  425  (1871). 

2  A  receiver  will  be  appointed  on  the  ground  of  disagreement 
where  it  appears  from  the  personal  relations  of  the  parties  that  a 
dissolution  of  the  firm  is  inevitable.  Marten  v.  Van  Schaick,  4 
Paige,  479  (1834). 


KECEIVER.  623 

mis-management  as  endangers  the  whole  concern  (/) ;'  Bk.  III. 
or  if  tbe  persons  having  the  control  of  the  partnership  Chap.  10. 

assets  have  already  made  way  with  some  of  them  (g)',    ec  '    ' 

in  all  these  cases  the  Court  will  interfere  by  appoint- 
ing a  receiver  (h). 

Again,  the  reluctance  of  the  Court  in   appointing  a  Effect  of 
receiver  against  a  partner,  being  based  on  the  confidence  fraud  by  a 
originally  reposed  in  him,  that  reluctance  disappears  if  Paituer- 
it  can  be  shown  that  such  confidence  was  originally 
misplaced.     Therefore,  where  a  defendant,  by  false  and 
fraudulent   representations,    induced  the    plaintiff    to 
enter  into  partnership  with  him,  and  the  plaintiff  soon 
afterwards  filed  a  bill,   praying  that    the    partnership 
might  be  declared  void,  and  for  a  receiver,  the  Court  on 
motion  ordered  that  a  receiver  should  be  appointed  (i). 

Moreover,  even    although    there  be   no   misconduct  Effect  of  ex- 
joepardising  the  partnership  assets,  the  Court  will  ap-  chiding  a 
point  a  receiver  if  the  defendant  wrongfully  excludes  Partner- 
his   co-partner  from  the  management  of  the  partner- 
ship affairs  (A;).2     This  doctrine  is  acted  on  where  the 
defendant  unsuccessfully  contends  that  the  plaintiff  is 
not  a  partner  (Z),  or  that  he  has  no  interests  in  the 
partnership  assets  (m). 

*  Where  a  partnership  is  alleged  on  the  one  side  and  [  *  552] 
denied  on  the  other,  and  a  motion  is  made  for  a  receiver,  Disputed 
the  Court  usually  declines  to  appoint  a  receiver  until  PartnersniP- 
that  question  is  determined  (n).3 

(/)  See  De  Tastet  v.  Bordieu,  cited  in  a  note  in  2  Bro.  C.  C. 
272  ;  but  see  Const  v.  Harris,  T.  &  R.  5:24. 

(g)  Evans  v.  Coventry,  5  De  G.  M.  &  G.  911. 

(/<)  See  Smith  v.  Jeyes,  4  Beav.  503. 

(i)  See  Ex  parte  Broome,  1   Rose,  69. 

(k)  See  Wilson  <;.  Greenwood,  1  Swanst.  481  ;  and  Goodman  v. 
Whitcomb,  1  J.  &  W.  589. 

(1)  Peacock  v.  Peacock,  16  Ves.  49  ;  Blakeney  v.  Dufaur,  15 
Beav.  40. 

(m)  Wilson  v.  Greenwood,  1  Swanst.  471,  where  the  plaintiffs 
■were  the  assignees  of  a  bankrupt  partner.  See,  too,  Clegg  v. 
Fishwick,  1  Mac.  &  G.  294,  where  the  plaintiff  was  the  admin- 
istratrix of  a  deceased  partner. 

(n)  Peacock  v.  Peacock,  16  Ves.  49  ;  Chapman  v.  Beach,  1  J. 
&  W.  594  ;  Fairburn  v.  Pearson,  2  Mac.  &  G.  144.  See  Rock  v. 
Matthews,  2  De  G.  &  Sm.  227,  as  to  the  conclusiveness,  upon  a 

1  So  where  one  partner  wastes  the  firm's  property  and  threatens 
to  apply  it  improperly,  Evans  v.  Evans.  9  Paige,  178  (1841); 
Shannon  v.  Wright,  60  Md.  524  (1878);  Phillips  v.  Trezevant,  67 
N.  Ca.  370  (1872);  in  the  last  two  cases  the  partner  who  com- 
mits the  waste  being  insolvent. 

2Hottenstein  v.  Conrad,  9  Kans.  435  (1872). 

3  Hobart  v.  Ballard,- 31  Iowa,  521  (1871  j;  Baxter  v.  Buchanan, 
3  Brewst.  (Pa.)  435  (1869). 


624 


ACTIONS  BETWEEN  PARTNERS. 


Bk.  III. 
Chap.  10. 
Sect.  6. 


Illegality  of 
partnership. 


Hale  v.  Hale. 


Receivers  of 
mines. 


[  *  553] 

Rove  v. 
Wood. 


Some  difficulty  occurs  where  the  defendant  relies  on 
illegality  as  a  defence  to  the  action  aginst  him.  If  the 
illegality  is  established,  the  Court  cannot,  it  is  con- 
ceived, interfere.  But  if  a  receiver  is  applied  for  before 
the  trial  of  the  action,  and  the  Court  is  not  satisfied  that 
no  relief  can  ultimately  be  given,  it  will  appoint  a  receiver 
to  protect  the  property  pendante  lite,  and  the  character 
of  the  defence  will  go  far  to  remove  any  scruples  the 
Court  might  otherwise  have  in  interfering.  Thus,  in 
Hale  v.  Hale  (o),  the  plaintiff  and  the  defendant  had 
carried  on  the  business  of  brewers  for  many  years  in 
partnership  together.  The  plaintiff  filed  a  bill  for  a 
dissolution,  and  the  defendant  then  denied  the  plain- 
tiff 's  right  to  any  account  or  relief  whatever,  on  the 
ground  that  the  partnership  was  illegal.  Having 
thus  set  the  plaintiff  at  defiance,  and  claimed  the  whole 
property  himself,  Lord  Langdale,  on  that  ground  alone 
appointed  a  receiver  and  manager,  although  the  plain- 
tiff was  only  a  dormant  partner,  and  the  defendant's 
management  of  the  business  was  in  no  way  complain- 
ed of. 

In  mining  partnerships  a  receiver  will  be  appointed 
or  refused  upon  the  same  principles  as  in  other  part- 
nership. Accordingly,  if  no  dissolution  or  winding  up 
is  sought,  a  receiver  and  manager  will  not  be  appoint- 
ed ( p  ) ;  but  with  a  view  to  a  dissolution  or  winding 
up,  a  receiver  and  manager  will  be  appointed,  if  there 
are  any  such  grounds  for  the  appointment  as  are  suf- 
ficients other  cases  (g);  or  if  the  partners  *  cannot 
agree  as  to  the  proper  mode  of  working  the  mines  until 
they  are  sold  (r).  In  Roive  v.  Wood  (s),  indeed,  a 
receiver  was  refused,  although  one  of  the  partners  ex- 
cluded the  other  from  interfering  with  the  mine  ;  but 
this  was  a  peculiar  case,  for  the  partner  complained  of 
was  not  only  a  partner,  but  also  a  mortgagee  in  posses- 
sion,   and   his    mortgage    debt   was    still    unsatisfied. 

motion  for  a  receiver,  of  an  answer  denying  the  partnership 
alleged  by  the  bill. 

(o)  4  Beav.  369.  See,  too,  Sheppard  r.  Oxenford,  1  K.  &  J. 
491,  where  a  receiver  was  appointed  although  the  legality  of  the 
partnership  was  denied. 

(p)  Roberts  v.  Eberhardt,  Kay,  148  ;  and  see  Rowlands  v. 
Evans,  and  Williams  v.  Rowlands,  30  Beav.  302,  noticed  below. 

(q)  Sheppard  v.  Oxenford,  1  Kay  &  J.  491,  where  there  was 
no  prayer  for  a  dissolution. 

(r)  Jefferys  v.  Smith,  1  J.  &  W.  298 ;  Lees  v.  Jones,  3  Jur.  N. 
S.  954.  In  "this  last  case  will  be  found  a  discussion  as  to  what 
ought  to  be  done  if  the  mine  is  held  on  a  lease,  and  cannot  be 
sold  without  the  lessor's  consent,  which  is  refused. 

(s)  2  J.  &  W.  553. 


RECEIVER.  625 

Again,   in  Norway  v.  Roive  (t),  although  the  plaintiff  Bk.  III. 
was  excluded,  a  receiver  was  refused  on  the  ground  of  ChaP-  l0- 

his  laches,  he  having  been  excluded  for  some  time,  and  Sect"  6' 

having  taken  no  steps  to  assert  his  rights   until   the  Norway  v. 
mine  proved  profitable  (u).  Rowe. 

In  Rowlands  v.  Evans  and  Williams  v.  Ron-lands  (x),  Lunacy, 
it  was  held  that  a  manager  could  not  be   appointed  to  Rowlands  v. 
carry  on  a  mine  for   the   benefit   of   a  lunatic  partner.  Evaiis. 
The  Court  ordered  a  sale,  and  appointed  an  interim 
manager  only. 

If  the  Court,  on  being  applied  to   for  the  appoint-  Appointment 
nient  of  a  receiver,  thinks  that  a  proper  case  for  such  of  partner  to 
appointment  is  made,  and  the  partner  actually  carrying  De  receiver, 
on  the  business  has  not  been  guilty  of  such  miscon- 
duct as  to  have  rendered  it  unsafe  to  trust  him,  the 
Court  generally  appoints  him  receiver  and  manager 
without  salary   (y).1     It  is  usual,  however,  to  require 
him  to  give  security  duly  to  manage  the  partnership 
affairs,  and  to  account  for  money  received  by  him   (z). 
In  other  cases  the  appointment  of  a  receiver  is  referred 
by  the  judge  to  his  chief  clerk,  and  leave  is  frequently 
gi vendor  each  partner  to  propose  himself.     A  partner 
who  is  appointed  receiver  becomes  the  officer  of  the 
Court,  and  must  act  and  be  respected  accordingly. 

The  order  appointing  a  receiver  usually  directs  the  0rder  a_ 
partners  *  to  deliver  up  to  him  all  the  effects  of  the  f  *  554] 
partnership,  and  all  securities  in  their  hands,  for  the  pointing  re- 
outstanding  personal  estate,  together  with  all  books  and  ceiver. 
papers  relating  thereto.2     The  receiver  is  directed  to 
get  in  the  debts  of  the  firm,  and  he   is,  if  necessaiy, 
empowered  to  bring  actions  with  the  approbation  of  the 
judge  ;  he  is  directed  to  pay  the  partnership   debts, 
and  to  pass  his  accounts,  and  to  pay  balances   in   his 
hands  into  court  (a). 

(0  19  Ves.  159. 

(u)  See  further  on  this  matter,  ante,  p.  466  etseq. 

(x)  30  Beav.  302. 

(y)  This  was  done  in  Wilson  v.  Greenwood,  1  Swanst.  471  ; 
Blakeney  v.  Dufaur,  15  Beav.  40.  See  Sargant  v.  Read,  1  Ch. 
D.  600,  where  one  of  the  plaintiffs,  heing  senior  partner,  had  lib- 
erty to  propose  himself,  although  it  was  urged  that  he  would 
thereby  obtain  an  unfair  advantage  as  regarded  the  good-will. 

(2)  See  the  previous  note. 

(a)  See  forms  of  order  inSeton  on  Decrees,  414,  ed.  4  ;  Wilson 

1  A  partner  maybe  appointed  receiver,  Honore  v.  Colmesnil,  1 
J.  J.  Mar.  506  (18:29);  Reynolds  v.  Austin,  4  Del.  Ch.  24  I  1837). 
If  a  partner  is  appointed  he  is  entitled  to  no  salary,  Berry  v. 
Jones,  11  Heisk.  206  (1873);  but  in  Honore  v.  Colmesnil,  1  J.  J. 
Mar.  506  (1829),  compensation  was  allowed. 

2  SeeMorey  v,  Grant,  48  Mich.  326  (1882). 

*  17   LAW   OF   PARTNERSHIP. 


626 


ACTIONS  BETWEEN  PARTNERS. 


Bk.  III. 
Chap.  10. 
Sect.  6. 

Dacie  v. 
John. 


Interfering 
with  re- 


With  respect  to  the  partnership  books  and  papers, 
an  order  for  their  delivery  will  not  be  made  if  there  is 
no  necessity  for  it,  or  if  it  would  occasion  inconveni- 
ence. For  example,  in  Dacie  v.  John  (b),  the  Court 
declined  to  order  a  solicitor,  who  was  the  mac  aging 
partner  of  a  firm,  to  deliver  up  its  books  and  documents 
to  the  receiver  :  for  the  receiver  had  free  access  to  them 
all,  and  nothing  more  was  considered  necessary. 

A  receiver  is  an  officer  of  the  Court,  and  any  inter- 
ference with  him,  or  with  property  under  his  protection, 
amounts  to  a  contempt  of  Court,  and  is  punishable  ac- 
cordingly (c).  If  a  judgment  creditor  desires  to  levy 
execution  on  property  in  the  custody  of  the  receiver, 
special  application  should  be  made  to  the  Court  in  the 
action  in  which  the  receiver  was  appointed,  and  the 
Court  will  direct  the  receiver  to  pay  the  judgment  debt 
or  make  such  other  order  as  may  be  just  (d).1 


[  *  555]        *  4.   Of  the  sale  of  partnership  property  under  the  order 

of  the  Court. 


Conversion 
of  partner- 
ship pro- 
perty. 


It  has  been  already  seen,  that  in  the  absence  of  a 
special  agreement  to  the  contrary,  the  right  of  each  part- 
ner (e)  on  a  dissolution,  is  to  have  the  partnership  prop- 

v.  Greenwood,  1  Swanst.  484  ;  Whitley  v.  Lowe,  4  Jur.  N.  S. 
815.  The  receiver  here  was  appointed  without  opposition  ;  see 
4  Jur.  N.  S.  197,  S.  C. 

lb)  McClel.  206. 

(e)  Sec  Lane  v.  Sterne,  3  Giff.  629,  where  a  sheriff  seized  part- 
nership property  in  the  custody  of  a  receiver  ;  Helmore  v.  Smith 
(No.  2),  35  Ch.  D.  449,  where  the  interference  was  by  advertise- 
ment. When  an  order  for  a  receiver  is  made,  a  person  is  some- 
times immediately  put  into  possession  ;  but  until  he  is  actually 
approved  as  receiver  by  the  Court,  strangers  to  the  action  in 
which  he  is  appointed  are  not  guilty  of  contempt  of  court  if  they 
interfere  with  him.     See  Defries  v.  Creed,  6  N.  R.  17. 

(d)  Kewney  r.  Attrill,  34  Ch.  D.  345.  See,  as  to  interpleader 
at  the  instance  of  the  sheriff,  ante,  pp.  358,  note  (q),  and  362. 

(e)  A  person  paid  by  a  share  of  profits  has  no  right  to  have 
them  ascertained  by  a  sale.  See  Rishton  v.  Grissell,  5  Eq.  326  ; 
Walker  y.  Hirsch,  27  Ch.  D.  460.  Pawsey  v.  Armstrong,  18  Ch. 
D.  698,  went  too  far.     See  the  last  case. 


1  After  the  appointment  of  a  receiver,  the  assets  of  the  firm 
are  regarded  as  in  the  custody  of  the  court  and  the  remedy  of 
the  creditors  against  those  assets  lies  in  equity.  Nobody  can  ob- 
tain a  preference  in  regard  to  them  by  any  judgment  against  the 
partner  and  execution  or  attachment  against  the  receiver.  Buck- 
ingham v.  Ludlum,  37  N.  J.  Eq.  137  (1883);  Holmes  v.  McDow- 
ell, 15  Hun.  585(1878);  Knode  v.  Baldridge,  73  Iud.  54  (1880); 
Jackson  v.  Lahee,  114  111.  287  (1885).  Contra  Adams  v.  Wood,  9 
Cal.  24  (1858);  Marye  v.  Jones,  id.  335  (1858);  see,  also,  Ross  v. 
Tittsworth,  37  N.  J.  Eq.  333  (1883). 


SALE  OP  PARTNERSHIP  PROPERTY.  627 

erty  converted  into  money  by  a  sale  (/) :  even  although  a  Bk.  III. 
sale  may  not  be  necessary  for  the  payment  of  debts  (g).1  ~naP-  10- 
This  mode  of  ascertaining  the  value  of  the  partnership  • 
effects  is  adopted  by  Courts  unless  some  other  course 
can  be  followed  consistently  with   the   agreement   be- 
tween the  partners.     And  even  where  the  partners  have 
provided  that  their  shares  shall  be  ascertained  in  some 
other  way,  still,  if   owing  to  any  circumstance  their  Agreements 
agreement  in   this   respect   cannot  be  carried  out,  or  if  whjcn  can_ 
their  agreement  does  not  extend  to  the  event  which  has  not  be 
in  fact  arisen,  realization  of  the  property  by  a  sale  is  carried  out. 
the  only  alternative  which  a  Court  can  adopt  (h). 

Thus  in  Cook  v.  Collingridge  (i),  where  the  partners  Agreement 
had  agreed  that  on  the  expiration   of  the  partnership  for  equal 
the  stock  in  trade  should  be  divided  between  the  part-  division, 
ners,  it  was  held  that   as  this   could  not  be  literally  ^ook.'*-  Col~ 
carried  into  effect,  there  must  be  a  sale  and  a  division   inSm&e- 
of  the  proceeds. 

So,  if  on  the  death  of  a  partner  an  option  is  given  to  Agreement 

a  third   party,  e.  g.,  his  son  or  executor,   to  take  his  to  tai<e  at 

share  at  a  valuation,  and  this  is   not  done,  a  sale  will  ^a  lu  I0IK 

be  ordered  (k).     Again  in  a  case  where  the  articles  t,1  'son  '"  , 
•  -i-ii  t        i-         ia-n        i       iff        Green  wood. 

had  provided  that  on  a  dissolution  by  *  the  death  of  a  r*  550  1 

partner  his  share  should  be  taken  by  the  survivors  at  a 
valuation,  and  they  had  afterwards  agreed  that  in  the 
event  of  a  dissolution  by  bankruptcy,  the  same  course 
should  be  followed  as  in  the  event  of  a  dissolution  by 
death,  it  was  held  that  this  last  agreement  not  being 
under  the  circumstances  binding  on  the  assignees,  the 
partnership  property  and  effects  ought  to  be  sold  (I). 
On  the  other  hand,  if  the  articles  of  partnership  can 
be  carried  out  in  their  spirit,  and  if  a  sale  is  inconsis- 
tent wjth  them,  then  the  rule  in  question  will  not  apply, 

(/)  Burdon  v.  Barkus,  3  Giff.  412,  and  on  appeal,  4  De  G.  F. 
&  J.  42,  where  a  purchase  by  one  partner  at  a  valuation  was  in- 
sisted on  ;  Rowlands  v.  Evans,  and  Williams  v.  Rowlands,  30 
Beav.  302,  a  case  of  lunacy.  See,  also,  Crawshay  v.  Collins,  15 
Ves.  227  ;  Crawshay  v.  Maule.  1  Swanst.  495;  Featherston- 
haugh  v.  Fen  wick,  17  Ves.  298  ;  Hale  v.  Hale;  4  Beav.  375.  See 
infra,  p.  558,  as  to  unsaleable  assets  and  pending  contracts. 

'(</)  See  Wild  r.  Milne,  26  Beav.  504. 

(h)  But  see  Syers  v.  Syers,  1  App.  Ca.  174,  infra,  p.  556. 

(/)  Jac.  607,  and  see  Rigden  v.  Pierce,  6  Madd.  353. 

(k)  See  Downs  v.  Collins,  6  Ha.  418  ;  Kershaw  v.  Matthews, 
2  Russ.  62  ;  and  Madgwick  v.  Wimble,  6  Beav.  495. 

(I)  Wilson  v.  Greenwood,  1  Swanst.  471. 

1  Freeman  v.  Freeman,  130  Mass.  260  (1884);  Malbec  de  Mont- 
joc  v.  Sperry.  95  II.  S.  401  (1877);  Godfrey  v.  White,  43  Mich. 
171  (1880);  Taylor  v.  Hutchinson,  25  Graft,  536  (1874);  Dick- 
inson v.  Dickinson,  29  Conn.  600  (1861). 


628 


ACTIONS  BETWEEN  PARTNERS. 


Bk.  III. 
Chap.  10. 
Sect,  6. 

Syers  v. 
Syers. 


No  sale 
where  there 
is  an  agree- 
ment to  the 
contrary 
which  can 
be  acted  on. 


Sale  not 
decreed 
although 
one  partner 
was  lunatic. 

Leaf  r.  Coles. 


[*557] 


as  for  example  in  those  cases  already  noticed  (m),  in 
which  it  has  been  agreed  that  a  deceased  partner's 
share  shall  be  ascertained  by  valuation,  or  from  the  last 
signed  account.  Moreover,  in  Syers  v.  Syers  (n),  it 
was  held  by  the  House  of  Lords  that  in  the  case  then 
before  it,  the  Court  could,  in  its  discretion,  either  order 
the  sale  of  the  undertaking  as  a  going  concern  or  ap- 
prove of  the  purchase  by  one  partner  of  the  share  of 
his  co-partner  (n). 

The  rule  as  to  selling  partnership  property  is  merely 
adopted  in  order  that  justice  may  be  done  to  all  parties, 
when  no  other  course  has  been  or  can  be  agreed  upon. 
It  is  not  an  arbitrary  rule,  inflexibly  applied  in  all 
cases  whether  it  is  necessary  or  not  ;  and  although,  if 
one  partner  or  his  representatives  insist  on  a  sale,  the 
Court  may  not  be  able  to  refuse  to  enforce  that  right  (o), 
still  the  Court  is  always  inclined  to  accede  to  any  other 
mode  of  settlement  which  may  be  fair  and  just  between 
the  partners.  In  a  case  where  one  partner  had  become 
lunatic,  and  a  decree  for  a  dissolution  had  been  ob- 
tained on  that  ground,  and  an  offer  was  made  by  the 
other  partners  to  pay  a  sum  of  money  as  the  lunatic's 
share,  the  Court  referred  it  to  the  Master  to  inquire 
whether  it  would  be  for  the  benefit  of  the  lunatic  that 
such  offer  should  be  accepted  ;  and  on  the  Master  re- 
porting in  the  affirmative,  the  Court  ordered  that  the 
offer  *  should  be  accepted,  thereby  dispensing  with  a 
sale  and  winding  up  in  the  ordinary  way  (p).  So,  if 
one  partner  is  an  infant,  and  it  appears  that  it  will  be 
for  his  benefit  that  the  whole  property  shall  be  sold  to 
one  or  more  of  the  partners  who  are  desirous  of  buying 
it,  and  the  other  partners  consent,  the  Court  will  sanc- 
tion a  sale  accordingly  (q).  But  although  it  may  be  for 
the  benefit  of  an  infant  or  lunatic  partner  that  his  share 
should  be  sold,  yet  if  the  other  partners  insist  on  the  sale 
of  the  whole  property  they  are  entitled  to  such  a  sale  (r).1 


(m  |  See  ante.  p.  420,  et  seq. 

(»)  1  App.  Ca.  174.  The  agreement  between  the  partners  was 
probably  not  intended  to  create  a  partnership  but  a  loan  (see  ante, 
book  i.  ch.  1,  §  2);  and  qu.  whether  the  discretion  alluded 
to  exists  in  all  cases  ?  But  why  should  it  not  ?  its  exercise  would 
often  be  most  beneficial. 

(o)  Wild  v.  Milne,  26  Bear.  504,  and  Rowlands  v.  Evans,  30 
Beav.  302. 

(p)  Leaf  v.  Coles,  1  De  G.  &  M.  G.  171.  See,  too,  Prentice  v. 
Prentice,  10  Ha.  App.  22. 

(q)  Crawshay  v.  Maule,  1  Swanst.  530. 

(r)  Rowlands  «'.  Evans,  and  Williams  v.  Rowlands.  30  Beav.  302. 

1  Instead   of  ordering  the  sale  of  the  assets  and  a  division  of 


SALE  OF  PARTNERSHIP  PROPERTY. 


629 


Co-owners  of  land,  whether  mineral  or  not,  are  enti-  jj^  ™-Q 
tied  to  a  partition  and  not  a  sale,  except  in  the  cases  Sectp6 
specified  in  the  Partition  Acts,  1868  and  18  <6:  and  even 


although  they  may  be  partners  in  the  profits  arising  Mining  part- 
from  the  land,  still  if  the  land  itself  is  not  partnership  ners  "P- 
property,  one  co-owner  is  not  entitled  to  have  it  sold 
against"  the  wishes  of  the  others,  except  under  those 
statutes  (s).  But  if  land  or  a  mine  is  partnership 
property,  the  right  of  each  partner  is  to  have  it  sold; 
and  a  partition  can  only  be  decreed  by  consent  J*).1 

The  sale  to  which  each  partner  has  a  right  is  a  sale  Mode  of 
to  the  highest  bidder  (u).  But  with  a  view  to  do  as  selling, 
little  injustice  as  possible,  when  the  Court  orders  a  sale 
it  will,  if  necessary,  direct  an  inquiry  as  to  the  proper 
mode  of  selling  (x);  and  whether  it  will  be  for  the 
benefit  of  all  parties  that  there  should  be  an  immediate 
sale,  or  that  the  concern  should  be  carried  on  for  the 
purpose  only  of  winding  up  of  its  affairs:  and  if  the 
latter  is  the'case,  the  Court  will  give  any  of  the  parties  , 

*  liberty  to  propose  himself  as  manager  until  a  sale  (y).  [     »***] 
In  Rowlands  v.  Evans  (z),  partnership  property  wasgjjjj™8* 
ordered  to  be  sold,  as  a  going  concern,  by  a  disinter- 
ested person,  with  liberty  to  all  parties  to  bid;  and  an 
interim  receiver  and  manager  was  appointed. 

Is)  See  ante,  p.  56. 

{t)  Wild  v.  Milne.  26  Beav.  504;  and  see  Burdon  r.  Barkus.  4 
De  G.  F.  &  J.  42.  and  Rowlands  v.  Evans,  30  Beav.  302.  As  to 
mines  not  saleable  without  the  consent  of  the  landlord,  see  Lees 
v.  Jones,  3  Jar.  N.  S.  954;  and  as  to  unsaleable  but  valuable  as- 
sets, infra,  note  (d).  . 

i  it )  No  partner  has  a  right  to  buy  or  to  compel  his  co-partners 
to  buy  at  a  valuation  unless  there  is  some  agreement  to  that 
effect,'  Burdon  c.  Barkus,  4  De  G.  F.  &  J.  42,  and  other  cases 
cited  ante,  p.  V35,  note  (/). 

(x)  As  in  Wilson  v.  Greenwood,  1  Swanst.  484;  Cook  v.  Colhng- 
ridge,  Jac.  624.  See,  also,  Syers  v.  Syers,  1  App.  Ca.  174,  where 
an  inquiry  was  directed  as  to  the  value  ot  the  plaintiff's  interest. 

(y)  Crawshay  v.  Maule,  1  Swanst.  529;  Waters  v.  Taylor,  2  V.  & 
B.  306.     See.  too,  Wild  r.  Milne,  26  Beav.  504. 

{z)  Rowlands  v.  Evans,  and  Williams  v.  Rowlands,  30  Beav. 
302.     So  in  Pawsey  v.  Armstrong,  18  Ch.  D.  698. 

the  proceeds,  the  court  will,  where  such  a  course  is  beneficial  to 
the  interested  parties  and  nobody  objects,  order  a  specific  divi- 
sion of  the  firm  property,  provided  there  are  no  debts  outstand 
in<*  Askew  v.  Springer,  111  111.,  662  (1885);  Lang  v.  Waring, 
25  Ala,  625  (1854);  Pierce  v.  Covert,  39  AVis.  252  (1875).  And 
this  can  be  done  even  in  the  face  of  outstanding  firm  liabilities, 
provided  each  partner  will  give  security  to  his  associates  for  the 
payment  of  debts  to  the  amount  he  gets.  Colehour  v.  Coolbaugh, 
81  111.  29  (1875). 

1  See  Godfrey  r.  White,  43  Mich.  171  (1880);  and  Carter  v. 
Bradley,  58  111.  101  (1871). 


630  ACTIONS  BETWEEN  PARTNERS. 

Bk.  III.  The  Court  is  extremely  reluctant  to  give  parties  who 

Chap.  10.        nave  the  conduct  of  a  sale  liberty  to  bid  at  it;  and  the 

Sfec1l_(i: conduct  of  a  sale  in  an  action  usually  belongs  to  the 

Conduct  of     plaintiff;  if,  therefore,  he  desires  to  bid,  some  arrange- 
sale  and  ment  has  generally  to  be  made  respecting  the  conduct 

leave  to  bid.   of  ^  sa!e>     other  parties  interested  have  seldom  any 
difficulty  in  obtaining  liberty  to  bid  (a).     Where  the 
Court  has  given  the  conduct  of  the  sale  to  any  person, 
the  Court  will  not  allow  him  to  be  interfered  with  (b). 
Sale  of  <*ood-       In  selling  the  good-will  of  a  going  concern,  the  book 
will.  debts  and  business  ought  to  be  sold  in  one  lot,  and  the 

purchaser  ought  to  be  informed,  if  the  facts  be  so,  that 
the  sellers  are  entitled  to  carry  on  business  in  competi- 
with  him  (c). 
Unsaleable  If  one  of  tne  partners  holds  an  appointment  which 

bul  Valuable  is  not  saleable,  but  the  profits  of  which  are  by  agree- 
assets.  ment  to  be  accounted  for  by  him  to  the  partnership,  the 

partner  holding  the  appointment  will  be  debited  with 
its  value;  for  that  is  the  only  mode  in  which,  upon  a 
dissolution,  such  a  source  of  gain  can  be  dealt  with  d). 
The  same  principle  applies  to  other  unsaleable  but 
valuable  assets,  to  which  one  partner  has  no  exclusive 
right  (e). 
Pending  eon-  But  if  the  object  of  the  partnership  is  to  carry  out  a 
tract-,.  certain  contract  which  is  unfinished  when  the  partner- 

ship is  dissolved,  the  Court  will  not  necessarily  order 
the  benefit  of  it  to  be  sold;  nor  order  the  share  of  a 
partner  in  it  at  the  time  of  dissolution  to  be  ascertained 
by  valuation;  but  will  leave  the  partners  to  *  complete 
[*559]        the  contract,  and  will   postpone  the  ultimate  account 

until  its  completion  (/). 
Sab-  before  Although  it  is  not  usual  for  the  Court  to  direct  a  sale 

trial.  before  the  trial  of  the  action,  still,  if  circumstances  re- 

quire it,  an  order  for  a  sale  will  be  made  on  motion, 
even  although  the  partnership  has  not  been  previously 
dissolved  (g). 

(a)  See.  on  this  subject,  Seton  on  Decrees.  1396,  ed.  4. 

(b)  Dean  v.  Wilson,  10  Ch.  D.  136. 

(c)  See  Johnson  v.  Helleley,  34  Beav.  63.  and  2  De  G.  J.  & 
Sm.  446. 

(d)  See  Smith  v.  Mules,  9  Ha.  572;  Ambler  v.  Bolton,  14  Eq. 
427. 

(e)  Ibid.     See  ante,  note  (t). 

(/)  See  McClean  v.  Kennard,  9  Ch.  336,  where  the  surviving 
partners  urged  that  this  would  not  be  fair,  as  they  might  have 
to  find  all  the  capital  to  complete  the  contract. 

{g)  Bailey  c.  Ford.  13  Sim.  495;  Crawshay  v.  Maule,  1  Swanst. 
506,  523,  524,  and  529;  Wilson  v.  Greenwood,  1  Swanst.  483. 
See,  also,  Hargreaves  v.  Hall,  11  Eq.  415,  the  order  of  July  22, 
1869. 


BETWEEN  PERSONS  WHO  HAVE  AGREED  TO  BECOME  PARTNERS.         631 

Section  VII. — Other  Miscellaneous  Actions 

1.  Between  persons  who  have  agreed  to  become  partners. 

If  a  person  agrees  to  become  a  partner,  and  he  breaks  Bk.  III. 
his  agreement,  an  action  for  damages  will  lie   against  ^    p' 
him;  and  any  premium  he  may  have  agreed  to  pay  may  k 


be  recovered  (h)  •/  and  it  is  no  defence  that  the  defend-  Action  ou 
ant  has  discovered  that  the  plaintiff  is  a  person  vvitn  agreements 
whom  a  partnership  is  undesirable  (i).  So,  if  a  mem-  g^jig 
ber  of  a  firm  agrees  to  introduce  a  stranger,  an  action 
lies  at  the  suit  of  the  latter  against  the  former  for  a 
breach  of  this  agreement,  although  it  may  have  been 
made  without  the  knowledge  of  the  other  members  of 
the  firm,  and  they  may  decline  to  recognize  it  (j). 

*  2.  Actions  between  partners.  [  *  560] 

The  Judicature  acts  and  rules  have  materially  altered 
the  law  relating  to  actions  between  partners.  Formerly 
no  action  at  law  could  be  maintained  by  one  partner 
against  another  if  it  in  any  way  involved  taking  a  part- 
nership account;  for  although  the  right  to  an  account 
was  a  legal  right,  the  old  action  of  account,  at  least  be- 
tween partners,  had  long  become  obsolete,  and  courts  of 
law  had  no  machinery  enabling  them  to  do  justice  in 
matters  of  account  (fc).2  Hence  it  became  settled  that 
actions  involving  accounts  between  partners  could  not 

{h)  Walker  v.  Harris,  1  Anst.  245;  Gale  v.  Leckie,  2  Stark,  107. 
In  Figes  v.  Cutler,  3  Stark.  N.  P.  C.  139.  it  was  held  that  an  ac- 
tion for  breach  of  an  agreement  to  become  a  partner,  could  not  be 
supported  without  proof  of  the  terms  of  the  intended  partnership. 
See,  also,  Morrow  v.  Saunders,  1  Brod.  &  Bing.  318.  But  see 
McNeill  v.  Eeid,  9  Bing.  68. 

(0  Andrewes  v.  Garstin,  10  C.  B.  N.  S.  444,  where  the  defend- 
ant pleaded  that  since  the  agreement  was  entered  into  he  had 
discovered  that  the  plaintiff  had  been  guilty  of  fraud  and  dis- 
honesty towards  a  former  partner. 

(j)  McNeill  v.  Reid,  9  Bing.  68. 

(ft)  No  instance  of  an  old  common  law  action  of  account  brought 
by  one  partner  against  another,  is  known  to  the  writer.  The  old 
action  of  account  is  obsolete,  although  there  have  been  a  few  in- 
stances of  it  in  modern  times  between  tenants  in  common  of  real 
property.  See  Baxter  v.  Hozier,  5  Bing.  N.  C.  288;  Sturton  v. 
Richardson,  13  M.  &  W.  17;  Beer  v.  Beer,  12  C.  B.  60;  Hender- 
son v.  Eason,  17  Q.  B.  701;  reversing  Eason  v.  Henderson,  12  ib. 
986. 

1  Vance  v.  Blair,  18  Oh.  532  (1849);  Hill  v.  Palmer,  56  Wis. 
123  (1875);  Goldsmith  v.  Sachs,  17  Fed.  Rep.  726  (1882);  Powell 
r.  Maguire,  43  Cal.  11   (1872). 

2  For  instances  of  the  employment  of  this  action,  see  Knerr  v. 
Hoffman,  65  Pa.  St.  126  (1870);  Appleby  v.  Brown,  24  N.  Y.  143 
,1861);  Wilhelm  v.  Taylor,  32  Md.  151  (1869). 


632 


ACTIONS  BETWEEN  PARTNERS. 


Bk.  III. 
Chap.  10. 

Sect.  7. 


Actions  re- 
lating to  real 
property. 


Actions  re- 
lating to 
goods. 

[  *  561] 


Actions  for 
damages,  &c, 


be  sustained.  The  Judicature  acts  and  rules  have,  how- 
ever, abolished  this  rule;  and  the  present  state  of  the 
law  on  this  subject  appears  to  be  as  follows: — 

First  as  regards  real  property. — The  equitable  as  well 
as  the  legal  ownership  must  be  regarded;  and  no  part- 
ner can  eject  or  expel  his  co-partners  from  land  in  which 
he  may  have  the  legal  estate,  bat  of  which  he  is  a  trus- 
tee for  the  firm,  nor  can  he  maintain  an  action  against 
his  co-partners  for  coming  on  such  land.  On  the  other 
hand,  they  can  restrain  him  from  excluding  them  there- 
from (I).  Whether  the  relation  of  trustee  and  cestuis 
que  trustent  exists,  depends  upon  whether  the  property 
is  partnership  property  or  not,  upon  whether  the  part- 
nership is  dissolved  or  not,  and  upon  whether,  if  dis- 
solved, the  property  is  a  partnership  asset  in  which  all 
the  partners  are  still  interested. 

Secondly  as  regards  personal  property. — Partners  are 
tenants  in  common  or  joint  tenants  of  the  goods  and 
chattels  belonging  to  the  firm;  but  one  partner  has  no 
right  to  take  possession  of  *  them  and  to  exclude  his 
co-partners  from  them;  and  he  can,  it  is  apprehended, 
be  restrained  from  doing  so  (m). 

Thirdly,  as  regards  actions  for  money  demands  or 
damages.  The  three  following  rules  may  be  taken  as 
guides: — 

1.  An  action  for  damages  may  be  maintained  by  one 
partner  against  another  in  all  those  cases  in  which  such 
an  action  might  have  been  maintained  before  the  Judi- 
cature acts;  provided  the  action  would  not  have  been 
restrained  by  a  court  of  equity. 

2.  Any  action  which  would  have  been  so  restrained 
cannot  be  supported. 

3.  An  action  may  be  maintained  by  one  partner 
against  another  for  any  money  demand  which  before 
the  Judicature  acts  could  have  been  made  the  subjeet 
of  a  suit  for  an  account  (n). 

Practically,  the  important  questions  which  will  arise 
under  the  new  procedure  are  red  viced  to  the  following: — 

1.  When  can  an  action  be  maintained  between  part- 
ners without  taking  a  general  account  of  all  the  part- 
nership dealings  and  transactions? 

2.  When  will  such  an  account  be  ordered  without  a 
dissolution  of  the  firm? 


(I)  As  to  the  old  law,  see  infra,  the  note  at  the  end  of  this  sec- 
tion, and  as  to  injunctions  in  such  cases,  ante,  p.  541. 

(m)  As  to  the  old  law,  see  the  note  at  the  end  of  this  section. 

(n)  A  transfer  to  the  Chancery  Division  may  become  necessary 
in  some  of  these  cases.     See  ante,  p.  458. 


ACTIONS  BETWEEN  PARTNERS.  633 

The  second  of  these  questions  has  been  already  con-  Bk.  III. 
sidered  (o).      The  first,  which  has  also  been  alluded  ^haP„10- 
to  (p),  can  only  be  answered  generally  by  saying  that        ' 
each  case  must  depend  upon  its  own  circumstances,  and 
upon  whether  justice  can  really  be  done  without  taking 
such  an  account  (q).     But  there  appears  to  be  no  rea- 
son why  an  action  should  not  be  brought  to  have  some 
disputed  item  in  an  account  settled,  and  why  a  decla- 
ratory judgment   should   not  be  pronounced  settling 
that  dispute  without  going  further,  unless  it  should  be- 
come necessary  to  do  so. 


*  NOTE  ON  THE  LAW  AS  IT  STOOD  BEFORE  THE  JUDI-  [  *  562] 
CATURE  ACTS. 

Although  the  law  relating  to  actions  at  law  between  partners 
has  been  completely  altered,  a  summary  of  it  may  still  be  use- 
ful for  reference,  and  is  accordingly  here  appended.1 

When  an  action  would  lie. 

First. — As  regards  real  property.     In  an  action  of  ejectment  a  \   Eject- 
plea  on  equitable  grounds  was  not  allowed  (r).     Hence,  if  a  firm  ment  and 
was  in  the  occupation  of  land,  the  legal  estate  in  which  was  in  trespass  by 
one  of  the  partners  only,  he  could  at  law  eject  his  co-partners  (s);  J^amst 
and  if  the  firm  had  been  dissolved  no  notice  to  quit  was  neces-  another, 
sary  before  ejectment   (t),  or  trespass   (w),  was  brought  against 
them.     The  equitable  doctrine  that  a  partnership,  although  dis- 
solved, subsists  for  the  purpose  of  winding  up  its  affairs,  afford- 
ed no  defence  at  law  to  such  an  action  (a;).     If  the  legal  estate 
was  in  all  the  partners,  and  one  partner  actually  excluded  the 
others,  from  the  land  legally  belonging  to  all,  ejectment  would 
lie  (y);  and  if  one  utterly  destroyed  the  common   property,  an 

(o)  Ante,  p.  494  et  seq.  (}))  Ibid. 

(q)  On  this  head  the  old  cases  referred  to  infra,  p.  564,  as  il- 
lustrating the  6th  rule,  will  still  be  useful.  See,  also,  ante,  p. 
494. 

(r)  Neave  v.  Avery,  16  C.  B.  328. 

(s)  Francis  v.  Doe,  4  M.  &  W.  331;  Smith  v.  Howth,  10  Ir. 
Com.  Law  Rep.  125. 

(t)  Doe  v.  Bluck,  8  C.  &  P.  464. 

(m)  Benham  v.  Gray,  5  C.  B.  138. 

(x)  See  the  last.  case. 

(y)  See  Peaceable  r.  Read,  1  East,  568;  Doe  v.  Horn,  3  M.  & 
W.  333,  and  5  ib.  564. 

1  As  the  law  on  this  subject  lias  been  greatly  modified  by  sta- 
tute in  each  State  and  as  every  State  lias  modified  it  in  a  man- 
ner peculiar  to  itself,  it  has  been  deemed  useless  to  insert  more 
than  a  very  few  American  citations  in  this  section  illustrative  of 
some  of  the  principles  laid  down  in  the  text. 


634 


ACTIONS  BETWEEN  PARTNERS. 


Bk.  III. 
Chap.  10. 

Sect.  7. 


2.  Trover  by 
one  partner 
against 
another. 


[  *  563] 

Trover  after 
division  of 
property. 


3.  Action  for 
breach  of  ex- 
press con- 
tract by  one 
partner 
against 
another. 


action  for  damages  might  be  sustained  (z);  but  for  injuries  not 
amounting  to  the  utter  exclusion  by  one  partner  of  the  others, 
an  action  it  seems  did  not  lie  («). 

Secondly. — As  regards  personal  property.  If  one  of  several 
joint  tenants,  or  tenants  in  common,  was  in  exclusive  possession 
of  the  common  property,  he  had  a  right  so  to  continue  if  he  could, 
and  no  action  against  him  would  lie  at  the  suit  of  his  co-ten- 
ant (6).  But  if  one  tenant  in  common  or  joint  tenant  destroy- 
ed (c),  or  as  it  seems  sold  (d),  the  common  property,  he  might  be 
sued  at  law  by  his  co-tenant.  In  the  case  of  a  sale,  however, 
the  purchaser  could  not  be  made  to  restore  the  property,  for  he 
at  all  events  acquired  the  interest  of  the  vendor,  and  became 
therefore  tenant  in  common  with  the  other  owners,  and  could 
not  be  sued  by  them  at  law  (e). 

*  If,  on  a  dissolution  of  partnership,  the  partnership  property 
had  been  divided  in  specie  amongst  the  partners,  each  might  re- 
cover what  had  been  allotted  to  him,  for  as  to  that  he  had  be- 
come sole  owner  (f);1  and  if  the  dissolution  and  the  division  of 
the  property  were  made  by  deed,  each  partner  was  precluded 
from  denying  that  any  division  had  in  fact  been  made,  or  that 
the  previously  existing  tenancy  in  common  had  not  been  deter- 
termined,  and  each  therefore  was  entitled  to  recover  what  the 
deed  declared  to  be  his  (g).2 

Thirdly. — An  action  for  damages  for  the  breach  of  an  express 
agreement  entered  into  by  one  partner  with  another  would  lie,  if 
the  damages  when  recovered  would  have  belonged  to  the  plaintiff 
alone.  Tinas  where  a  partner  retired,  and  he  covenanted  with 
his  co-partners  not  to  carry  on  business  within  certain  limits,  or 
they  covenanted  to  indemnify  him  against  the  debts  of  the  firm, 
actions  for  damages  occasioned  by  breaches  of  these  covenants 


(z)  See  Cubitt  v.  Porter,  8  B.  &  C.  257;  Stedman  v.  Smith,  8 
E.  &B.  1. 

(a)  But  see  Martyn  v.  Knowllys,  8  T.  R.  146;  Stedman  v. 
Smith,  8  E.  &  B.  1, 

(6)  See  2  Wms.  Saund.  47,  o.;  Foster?-.  Crabb,  12  C.  B.  136; 
Hollidav  v.  Camsell,  1  T.  R.  658;  Fennings  v.  Grenville,  1 
Taunt.  241. 

(c)  Barnardiston  v.  Chapman,  cited  in  4  East,  121,  and  Bull. 
N.  P.  34-5;  2  Wms.  Saund.  47,  o. 

(d)  Mayhew  v.  Herrick,  7  C.  B.  217;  Barton  v.  Williams,  5  B. 
&  A.  395;'  Williams  v.  Barton,  3  Bing.  139. 

(e)  Fox  v.  Hanbury,  Cowp.  445,  and  other  cases  of  that  class. 
(/)  See  Jackson  v.  Stopherd,  2  Cr.  &  M.  361  ;  and  Wiles  v. 

"Woodward,  5  Ex.  557. 
{ff)  Ibid. 


1  See  Ivev  v.  Hammock,  68   Ga.  428  (1881);    Belcher  v.  Van 
Dusen,  37  111.  281  (1869). 

2  Bartley  v.  Williams.  66  Pa.  St.  329  (1870);  Harkev  r.  Till- 
man, 40  Ark.  551  (1883) ;  Hunt  v.  Morris,  44  Miss.  31*4  (1870). 


WHEN  MAINTAINABLE  BEFORE  THE  JUDICATURE  ACTS.  635 

■would  clearly  lie  (h).1     So,  if  a  partnership  was  entered  into  for  Bk.  III. 
a  definite  time,  and  one  partner  was  turned  out  by  his  co-part-  Chap.  10. 

ners  before  that  time  had  expired,  he  could  sue  them  for  this  k  

breach  by  them  of  their  agreement,  and  recover  damages  for  the 
injury  he  had  sustained  (i);2  so  an  action  might  be  maintained 
for  not  rendering  accounts  and  dividing  profits  (A-);  for  a  penalty 
stipulated  to  be  paid  in  case  of  a  breach  of  agreement  (I);  for 
rent  covenanted  to  be  paid  (m);3  for  not  indemnifying  the  plain- 
tiff against  a  debt  (»);  for  not  putting  the  plaintiff  in  funds  to 
enable  him  to  defray  expenses  as  agreed  (o). 

Fourthly. — If  a  person  agreed  to  become  a  partner  with  others  4.  Action  for 
and  to  furnish  a  certain  amount  of  capital,  and  he  made  default,  n°t  furnish- 
they  could  sue  him  at  law  for  damages,  although  he  as  well  as  m°      P1  a  ' 
they  were  to  have  had  an  interest  in  what  he  undertook  to  fur- 
nish (}>).* 

*It  followed  from  the  above  that  if  A.  and  B.  agreed  to  become  I"  *  564] 

partners,  and  each  agreed  to  furnish  a  certain  amount  of  capital,  Loan  by  one 

and  A.  lent  B.  the  amount  B.  was  to  contribute,  this  loan  con-  partner  of 

stituted  a  debt  for  which  an  action  by  A.  against  B.  would  lie.  ?um    °    ? 

J  brought  in 

■  by  the  other. 

i  ft)  Leighton  v.  Wales,  3  M.  &  WT.  545;  White  i:  Ansdell,  Tyr. 
&  Gr.  785.  Barker  v.  Allan,  5  H.  &  N.  61,  is  an  instance  of  a 
successful  action  by  a  shareholder  against  directors  who  had 
agreed  to  indemnify  him  against  calls.  See,  too,  Haddon  v. 
Ayres,  1  E.  &  E.  118" 

(i)  See  Greenham  v.  Gray,  4  Ir.  Com.  Law  Rep.  501. 

(/.i  <  iwston  v.  Ogle,  13  East,  538;  and  see  Stavers  v.  Curling,  3 
Bing.  N.  C.  355. 

(I)  Radenhurst  v.  Bates,  3  Bing.  463. 

i  m  '  Bedford  v.  Brutton.  1  Bing.  N.  C.  399. 

in)  Want  v.  Keece,  1  Bing.  18. 

(o)  Brown  v.  Tapscott,  6  M.  &  W.  119. 

(p)  Hesketh  v.  Blanchard,  4  East,  144;  Venning  v.  Leckie.  13 
East.  7;  Gale  v.  Leckie,  2  Stark.  107.  Hesketh  v.  Blanchard  gave 
rise  to  much  controversy  (see  in  Stocker  v.  Brocklebank,  3  Mac. 
&  G.  265;  Rawlinson  v.  Clarke,  15  M.  &  W.  298;  Collyeron  Part, 
p.  60),  not  indeed,  with  reference  to  the  question  decided,  but 
with  reference  to  an  opinion  expressed  by  Lord  Ellenborough, 
that  no  partnership  existed  between  Robertson  and  the  plaintiff, 
except  as  regards  third  parties.  Having  regard  to  the  decisions 
relating  to  partnerships  in  profits,  it  is  difficult  to  assent  to  this 
opinion;  but  the  case  was  unimpeachable  as  regards  the  point 
befoie  the  court,  viz.,  the  right  of  the  plaintiff,  whether  partner 
or  not  with  Robertson,  to  recover  the  price  of  the  meat  for  which 
the  plaintiff  had  been  compelled  to  pay. 


1  Lathrop  v.  At  wood,  21  Conn.  117  (1851);  Gilbert  r.  Wiman, 
1  N.  Y.  550  (1848);  Carter  v.  Adamson,  21  Ark.  287  (1861). 

-   Hill  v.  Palmer,  56  Wis.  123  (1882). 

:;  If  A.  own  a  property  and  rent  it  to  the  firm  of  A.  &  B.,  he 
cannot  sue  B.  for  the  hitter's  share  of  the  rent.  Pico  v.  Cuvas, 
47  Cal.  174  (1873);  Estes  v.  Whipple,  12  Vt.  373  (1840). 

4  Pillsbury  i>.  Pillsbury,  20  N.  H.  90  (1840);  Williams  v.  Hen- 
shaw,  11  Pick.  79  (1831). 


636 


ACTIONS  BETWEEN  PARTNERS. 


Bk.  III. 

Chap.  10. 

Sect.  7. 

Action  for 
not  contri- 
buting to 
expenses. 
5.  Action  by 
one  partner 
against 
another  for 
matters 
unconnected 
with  the 
partnership 
accounts ; 


6.  and  for 
matters  not 
involving 
them. 

Action  for 
amount  of 
valuation  ; 


for  balance 
struck  ; 


although  they  may  actually  have  become  partners  (q).  And  it 
also  followed  that,  if  partners  agreed  to  contribute  capital  from 
time  to  time  to  meet  expenses,  as  occasion  might  require,  and 
one  of  them  was  compelled  to  pay  the  whole  of  the  expenses  for 
which  all  were  liable,  he  could  sue  his  co-partners  for  what  they 
ought  to  have  contributed,  according  to  their  agreement  (r). 

Fifthly. — One  partner  might  maintain  an  action  for  damages  in 
respect  of  a  demand  which  had  either  nothing  to  do  with  the 
partnership  business,  or,  if  entangled  in  it,  was  only  so  entangled 
by  reason  of  the  wrongful  conduct  of  the  defendant.1  Thus  one 
partner  who  had  received  money  to  the  use  of  another  might  be 
sued  for  it,  although  he  had  paid  it  to  the  credit  of  the  firm;  for 
his  business  was  to  hand  it  over  to  fiis  co-partner  (s).  So  a  part- 
ner who,  in  fraud  of  his  co-partners,  had  given  a  note  in  the 
name  of  the  firm  for  a  private  debt  of  his  own,  Avhereby  his  co- 
partners had  been  compelled  to  pay  such  note,  was  liable  to 
them  at  law  for  the  whole  of  what  they  had  been  compelled 
to  pay  {t). 

Sixthly. — One  partner  might  sue  another  at  law  in  respect  of  a 
matter  which,  though  relating  to  the  partnership  business,  was  sep- 
arate and  distinct  from  all  other  matters  in  question  between  the 
partners,  and  could  and  ought  to  be  determined  without  going 
into  the  partnership  accounts  {it).  Thus  where  a  partnership 
had  been  dissolved,  and  it  had  been  agreed  that  one  partner 
should  take  all  the  partnership  property  at  a  valuation,  and  it 
had  been  valued,  and  he  had  taken  it  at  that  valuation,  and  the 
values  of  the  shares  of  the  other  partners  had  been  ascertained, 
they  might  separately  sue  him  at  law  lor  the  amount  payable  to 
them  respectively  (v).  So,  if  partners  went  through  the  accounts 
of  the  partnership,  and  a  final  balance  was  struck,  and  the  amounts 
of  their  shares  were  ascertained,  and  the  person  by  whom  those 
amounts  were  to  be  paid  was  also  ascertained,  an  action  would 
lie  against  him  in  respect  of  each  share  to  be  paid  by  him  (a-).2 

(q)  Elgie?:.  Webster,  5  M.  &  W.  518;  Ex  parte  Notley,  1  Mon. 
&  Ayr.  46,  and  3  D.  &  Ch.  367.  See  Jestons  v.  Brooke,  Cowp. 
793. 

(r)  Brown  v.  Tapscott,  6  M.  &  W.  119.  See,  also,  French  r. 
Stvring,  2  C.  B.  N.  S.  357. 

(s)  Smith  v.  Barrow,  2  T.  R.  476. 

(<)  Cross  v.  Cheshire,  7  Ex.  43;  Osborne  r.  Harper,  5  East.  225. 

(w)  The  Court  of  Chancery  would  not  restrain  such  actions. 
See  ante,  p.  543. 

(t>)  See  Jackson  v.  Stopherd,  2  Cr.  &  M.  361. 

(x)  Morley  v.  Baker,  3  Fos.  &  Fin.  146;  Moravia  v.  Levy,  2  T. 
E.  483,  note;  Foster  v.  Allanson,  2  T.  R.  479:  Wrav  v.  Milestone, 
5  M.  &  W.  21;  Brierly  v.  Cripps,  7  C.  &  P.  709;  Preston  v.  Strut- 

1  Seaman  v.  Johnson,  46  Mo.  Ill  (1870);  Haller  r.  Williamo- 
wicz.  23  Ark.  566  (1861);  Hale  v.  Wilson,  112  Mass.  444  (1873). 

2  Knerr  v.  Hoffman.  65  Pa.  St.  126  (1870);  Jacques  v.  Hulit, 
16  N.  J.  L.  38  (1837);  Wright  v.  Jacobs,  61  Mo.  19  (1875). 


WHEN  MAINTAINABLE  BEFORE  THE  JUDICATURE  ACTS.  637 

*The  balance,  however,  must  hare  been  a  final  balance  to  be  [  *  565] 
paid,  and  not  a  balance  to  be  carried  over  to  a  fresh  account  in  Bk.  III. 
continuation  of  that  just  closed.     Therefore,  where  one  partner  Chap. 10. 
sued  another  for  a  debt  unconnected  with  the  partnership,  the         ' 
defendant  was  not  allowed  to  set  off  a  balance  found  due  to  him 
on  the  partnership  account;  for  it  did  not  appear  that  the  ac- 
count which  had  been  stated  was  a  final  account,  nor  that  the 
plaintiff  had  ever  promised  to  pay  the  balance  which,  on  taking 
the  account,  was  found  due  to  the  defendant  (y).     In  this  last 
case  the  partnership  continued  after  the  balance  sued  for  was 
struck;  but  if  a  balance  was  struck,  and  was  to  be  paid  by  one 
partner  to  the  other,  it  might  probably  have  been  sued  for,  not- 
withstanding the  continuance  of  the  partnership:  for  ex  hypotTiesi, 
it  was  isolated  and  separated  from  the  general  account  (z). 

Again,  if  one  partner  gave  to  his  co-partner  a  bill  or  note  which  on  bill  or 
was  in  such  a  form  as  to  bind,  not  the  firm,  but  the  partner  who  note, 
gave  it,  he  might  be  sued  by  his  co-partner  thereon,  whatever  the 
state  of  the  accounts  between  the  two  might  be,  and  although  the 
bill  or  note  in  question  had  reference  to  some  partnership  trans- 
action ;  for  by  giving  the  bill  or  note,  the  demand  in  respect  of 
which  it  was  given  was  isolated  from  the  general  partnership  ac- 
count (a).1  An  I.  O.  U.  being  evidence  of  an  account  stated, 
might  be  sued  upon  by  one  partner  against  another  accordin  gly(6). 

Upon  precisely  the  same  principle,  if  a  partner  leased  property  Action  for 
to  trustees  for  the  firm,  and  those  trustees  covenanted  to  pay  the  rent ; 
rent,  he  might  sue  them  on  that  covenant,  although  he  might, 
as  one  of  the  firm,  be  bound  to  indemnify  the  trustees  against  all 
losses  sustained  by  them  in  that  character,  and  the  trustees  might 
themselves  be  members  of  the  firm  ;  for  the  covenant  to  pay  the 
rent  constituted  a  demand  distinct  from  all  others  (cl. 

ton,  1  Anst.  50;  Henley  v.  Soper.  8  B.  &  C.  16;  Rackstraw  v. 
Imber,  Holt,  368;  Wells  v.  Wells,  1  Ventr.  40. 

(y)  Fromont  v.  Coupland,  2  Bing.  170.  See,  too,  Lyon  v. 
Haynes.  5  Man.  &  Gr.  504,  where  the  sum  ascertained  to  be 
payable  was  subject  to  contingent  claims. 

(z)  This  point  was  raised,  but  not  decided,  in  Carr  v.  Smith,  5 
Q.  B.  128,  where  the  action  failed,  because  the  account  sued  on 
had  been  made  out  by  a  non-partner,  and  had  not  been  assented 
to  by  the  partners,  and  was  not  stamped  as  an  award. 

(a)  See  Beecham  v.  Smith,  E.  B.  &  E.  442  ;  Neale  v.  Turton, 
4  Bing.  151  ;  Preston  v.  Strutton,  1  Anst.  50  ;  Fox  v.  Frith,  10 
M.  &  W.  131,  and  Hey  wood  v.  Watson,  4  Bing.  496.  Conipt  re 
Tibaldi  v.  Ellerman,  6  Dowl.  &  L.  71.  And  as  to  one  partner 
suing  another  on  a  bill  which  he  has  indorsed,  but  not  with  the 
intention  of  paying  it,  see  Denton  v.  Peters,  L.  R.  5  Q.  B.  475. 

(b)  Graves  v.  Cook,  2  Jur.  N.  S.  475,  Ex. 

(c)  Bedford  v.  Brutton,  1  Bing.  N.  C.  399.  In  such  a  case, 
however,  a  counter-claim  would  now  be  set  up  and  have  to  be 
adjusted. 

1  Burnes  v.  Scott,  117  U.  S.  582  (1886);  Merrill  v.  Green,  55  N. 
Y.  270  (1873). 


638 


ACTIONS  BETWEEN  PARTNERS. 


Bk.  III. 

Chap.  10. 
Sect.  7. 

for  money 
received  to 
plaintiff's 
use  ; 

[  *  566] 

for  money 
placed  in  de- 
fendant's 
hands  for  a 
particular 
purpose. 
Actions  for 
money  paid 
under  mis- 
take as  to 
accounts ; 
on  agreement 
to  indem- 
nify: 


tor  contribu- 
tion in  re- 
spect ot  a 
particular 
loss  ; 

Sedgwick  v. 
Daniell. 


for  contribu- 
tion when 
one  has  paid 


Again,  if  one  partner  received  money  for  the  use  of  the  firm 
in  respect  of  some  transaction  separate  and  distinct  from  its  other 
business,  and  the  money  thus  received  ought  to  have  been  divid- 
ed without  reference  to  other  matters,  his  co-partners  might  sue 
him  at  law  for  their  shares  of  the  money  in  question  (d). 

*  So,  if  one  partner  paid  money  of  his  own  to  his  co-partner, 
in  order  that  it  might  be  applied  by  him  for  some  specified  part- 
nership purpose,  and  it  was  received  for  that  purpose  and  no 
other,  and  was  misapplied,  an  action  lay  for  the  recovery  of  such 
money  ;  for,  ex  hypothesis  it  never  was  the  money  of  the  firm, 
and  the  duty  of  the  partner  who  received  that  money  was  either 
to  apply  it  as  agreed,  or  to  return  it  intact  (e). 

So  a  purchaser  of  a  partner's  share  at  a  price  calculated  on  the 
profits,  could  recover  the  amount  which  he  had  overpaid  in  ig- 
norance of  the  real  state  or  the  accounts  (J).1 

Again,  if,  in  respect  of  some  particular  transaction,  one  partner 
had  expressly  agreed  to  indemnify  another,  and  had  not  done  so, 
an  action  might  be  brought  by  the  latter  against  the  former,  in- 
asmuch as  the  right  to  be  indemnified  had,  by  agreement,  been 
made  independent  of  all  other  questions  between  the  partners  (g). 
Therefore,  where  one  partner  in  his  own  name  accepted  a  bill  for 
a  partnership  debt,  on  the  faith  of  a  promise  by  one  of  the  other 
partners  that  he  would  provide  funds  to  pay  the  the  bill,  and 
the  acceptor  was  nevertheless  compelled  to  pay  it,  he  was  held 
entitled  to  recover  the  whole  amount  from  the  other  partner  (h). 

Further,  if  some  of  a  number  of  partners  gave  their  promissory 
note  for  better  securing  payment  of  a  debt  owing  by  them  and 
their  co-partners,  and  one  of  the  makers  of  the  note  w-as  com- 
pelled to  pay  the  whole  amount  of  it,  he  was  entitled  to  sue 
each  of  the  other  makers  of  the  note  for  his  proportion  of  the 
sum  so  paid.  For,  in  the  case  supposed,  the  right  to  contribu- 
tion arose  in  respect  of  a  matter  not  involved  in  the  general  ac- 
count, and  did  not  depend  upon  the  circumstances  that  the 
makers  of  the  note  were  partners.  This  was  decided  by  the 
Court  of  Exchequer  in  Sedgwick  v.  Daniell  (i). 

However,  the  decisions  did  not  go  the  length  of  allowing 
one  partner  who  had    been  compelled    to  pay  the  whole   of  a 

(d)  See  Graham  v.  Robertson,  2  T.  R.  282.  In  Ex  parte  Dodg- 
son,  Mon.  &  McAr.  445,  it  was  held  that  one  of  two  sub-partners 
might  prove  against  the  other's  estate  for  half  of  the  profits  re- 
ceived by  him  in  respect  of  his  share  in  the  principal  firm.  Com- 
pare Bovill  ?>.  Hammond,  6  B.  &  C.  149. 

(e)  See  Wright  v.  Hunter,  1  East,  20. 

(/)  Townsend  v.  Crowldy,  8  C.  B.  N.  S.  477. 
(ff)  Coffee  v.   Brian,  3  Bing.  54  ;  see,  too.   Wilson  v.  Cutting, 
10  Bing.  430  ;  Brown  v.  Tapscott,  6  M.  &  W.  119. 
(h)  Coffee  v.  Brian,  3  Bing.  54. 
(i)  Sedgwick  v.  Daniell,  2  H.  &  N.  319. 

1  Bond  v.  Hays,  12  Mass.  34  (1815). 


WHEN  MAINTAINABLE  BEFORE  THE  JUDICATURE  ACTS.  639 

partnership  debt  to  sue  his  co-partners  at  law  for  contribution,  Bk.  III. 
'in  the  absence  of  special  circumstances  (fc).1  Chap.  10. 

But  if  one  of  several  projectors  of  a  company  was  compelled  to 


pay  a  debt  owing  by  them  all,  he  could  obtain  contribution  from  more  than 
them  by  an  action  at  law.  although  there    were  unsettled  ac-  hi*  share  of  a 
counts  between  him  and  them  (I),  debt  of  the 

v  ;  firm. 

*  When  an  action  would  not  lie.  r  *  567] 

It  is  clear  from  the  cases  referred  to  in  the  last  few  pages,  that  General  rule 
there  was  no  such  rule  as  that  one  partner  could  not  sue  another  that  one 
at  law,  in  respect  of  a  debt  arising  out  of  a  partnership  transac-  Partner  can_ 
tion,  and  that  this  circumstance  alone  afforded  no  reason  why  an  another  at 
action  should  not  be  brought  by  one  partner  against  another  (m).  law 
Except,  however,  in  an  action  of  account,  it  was  a  general  rule  in  respect  of 
that  between  partners,  whether  they  were  so  in  general  or  for  arjv  matter 
a  particular   transaction   only,  no   account   could  be  taken  at  uivolvingthe 
law  (n) ;  nor  (except  in  an  action  of  account)  could  one  partner  sue  accountS  ^ 
another  at  law,  unless  the  cause  of  action  was  so  distinct  from 
the  partnership  accounts  as  not  to  involve  their  consideration  (o); 
nor  unless  the  plaintiff  if  he  recovered  would  be  justified  in  keep- 
ing what  he  might  get  without  afterwards  having  to  account  to 
his  co-partners  for  any  part  of  it  (p).     Hence  one  partner  could 
not  sue  another  at  law  for  work  and  labour  done  for  the  firm, 
and  therefore  on  account  as  well  of  the  plaintiff  as  of  the  defend- 
ant (q);  nor  for  money  had  and  received  for  the  firm,  for  it  must 
be  properly  shared  between  the  parties  to  the  action  (r);  nor  for 

(k)  Sadler  v.  Nixon,  5  B.  &  Ad.  936.  See,  too,  Batard  v. 
Hawes,  2  E.  &  B.  287  ;  Helme  v.  Smith,  7  Biug.  713  ;  and  Pear- 
son v.  Skelton,  1  M.  &  W.  504  ;  and  compare  Wooley  v.  Batte,  2 
C.  &  P.  417  ;  Osborne  v.  Harpur,  1  Smith.  411. 

(Z)  Batard  v.  Hawes,  2  E.  &  B.  287  ;  Boulter  v.  Peplow,  9  C. 
B.  493. 

(m)  See  Worrall  r.  Grayson,  1M.&W.  166. 

(n)  Bovill  v.  Hammond,  6  B.  &  C.  151 ;  and  see  Scott  v.  Mcin- 
tosh, 2  Camp.  238. 

(o)  Ibid. ;  and  see  the  cases  in  the  six  following  notes.  This 
rule  was  held  to  prevent  the  cestui  que  trust  of  a  partner  from 
suing  the  other  partners.  See  Goddard  v.  Hodges,  1  Cr.  &  M. 
33.  Sed  quxre.  The  same  rule  would  probably  have  prevented 
a  person  entitled  to  a  share  of  profits  from  suing  at  law  for  them 
where  they  had  not  been  ascertained. 

{p)  Mil'burn  v.  Codd,  7  B.  &  C.  421  ;  Bedford  v.  Brutton,  1 
Bing.  N.  C.  405  ;  Caldicott  v.  Griffiths,  8  Ex.  898. 

(q)  Goddard  v.  Hodges,  1  Cr.  &  M.  33 ;  Holmes  v.  Higgins,  1 
B.  &  C.  74;  Milburn  v.  Codd,  7  B.  &  C.  419  ;  Lucas  v.  Beach,  1 
Man.  &  Gr.  417. 

(r)  Bovill  v.  Hammond,  6  B.  &  C.  149  ;  Smith  v.  Barrow.  2  T. 
R.  476;  Fromont  r.  Coupland,  2  Bing.  170.  See,  too,  Lewis  v. 
Edwards,  7  M.  &  W.  300 ;  Thomas  v.  Thomas,  5  Ex.  28. 


1  Westerlo  v.  Evprtson,  1  Wend.  532  (1828):  Harris  v.  Harris. 
39  N.  H.  45  (1859). 


640 


ACTIONS  BETWEEN  PAKTNERS. 


Bk.  III. 
Chap.  10. 
Sect.  7. 


[  *  568] 


Actions  for 
recovery  of 
partnership 
goods,  &c. 

Actions  for 

improper 

sale. 


Mayhew  v. 
Herrick. 


money  paid  to  the  use  of  the  defendant,  if  the  question  whether 
he  ought  to  repay  it  or  not  turned  on  the  state  of  the  partnership 
accounts  (s) ;  nor  for  money  lent  to  the  firm  of  which  the  plaintiff 
was  himself  a  member,  for  the  advance  only  formed  an  item  in 
the  partnership  account  (t);  nor  on  a  bill  or  note  drawn,  accepted, 
or  endorsed  in  such  a  manner  as  to  bind  the  firm  jointly  and  not 
its  members  severally  also,  for  in  such  a  case  not  only  must  the 
plaintiff  as  one  of  the  firm  have  contributed  to  payment  of  the 
instrument,  but  he  ought  also  to  have  been  a  defendant  to  the 
action  (?<)•  For  similar  reasons,  *  if  partners  became  indebted  to 
a  third  person  who  died,  and  appointed  one  of  them  his  execu- 
tor, this  one  could  not  even  as  executor  sue  his  co-partners  for 
the  debt  due  to  the  deceased  (a?);  and  if  there  were  two  firms 
with  a  partner  common  to  both,  one  firm  could  not  sue  the  other 
at  law  [y) ;  neither  was  there  any  mode  by  which  at  law  one 
partner  could  sue  the  firm  or  be  sued  by  it  (2).  But  upon  a  joint 
and  several  promissory  note,  a  partner  might  be  sued  by  his  co- 
partners or  by  a  firm  of  which  they  were  members  (a). 

Again,  as  one  tenant  in  common  of  personalty  could  not  sue 
his  co-tenant  for  the  recovery  of  that  property,  it  follows  that 
one  partner  could  not,  by  action  at  law,  obtain  from  his  co-part- 
ner property  of  the  firm  wrongfully  detained  by  him  (b). 

It  was  not,  however,  so  clear  that  if  one  partner  wrongfully 
sold  property  of  the  firm,  his  co-partner  could  not  sue  him  at  law, 
either  for  the  wrongful  conversion  or  for  a  share  of  the  produce 
of  the  sale.  For  although  the  older  decisions  were  opposed  to 
any  such  right  (c),  it  was  held  in  Mayhew  v.  Herrick  (d),  that  a 
sheriff  who,  under  &fi.  fa.  against  one  partner,  sold  goods  of  the 
firm,  was  answerable  at  law  to  the  assignees  of  the  other  partner 
for  one-half  of  the  proceeds  of  the  sale  ;  and  it  was  previously 
(s)  Robson  r.  Curtis,  1  Stark.  78.  But  see  Townsend  v.  Crowdy, 
8  C.  B.  N.  S.  477,  noticed  ante,  p.  566. 

(O'Perring  v.  Hone,  4  Bing.  28;  Colley  v.  Smith,  2  Moo.  & 
Bob.  96. 

(id)  See  Neale  v.  Turton.  4  Bing.  149  ;  Mainwaring  v.  Newman, 
2  Bos.  &  P.  120 ;  Teague  v.  Hubbard,  8  B.  &  C.  345,  and  2  Man. 
&  Ry.  369  :  Tibaldi  v.  Ellerman,  6  Dowl.  &  L.  71. 
(x)  Moffat t  v.  Van  Millingen,  cited,  2  Bos.  &  P.  124. 
{ij)  Perring  r.  Hone,  2  Car.  &  P.  401,  and  4  Bing.  28  ;  Main- 
waring  v.  Newman,  2  Bos.  &  P.  120  ;  Bosanquet  v.  Wray,  6 
Taunt.  597  ;  Jacaud  v.  French,  12  East,  317. 

(z)  See,  in  addition  to  the  cases  cited  in  the  last  note,  De  Tastet 
v.  Shaw,  1  B.  <x  A.  664,  and  Richardson  r.  The  Bank  of  England, 
4  M.  &  Cr.  171,  172,  per  Lord  Cottenham. 

(a)  See  Beecham  v.  Smith,  E.  B.  &  E.  442,  and  ante.  p.  565. 
(6)  See   Fox   v.  Hanbury,  Cowp.  445.     In  Sharp  r.  Warren,  6 
Price,  131,  it  was,  however,  held  that  the  steward  of  a  friendly 
society  was  entitled  to  recover,  at  law,  a  box  of  money  belonging 
to  the  society,  but  run  off  with  by  one  of  its  members. 

(c)  Graves  v.  Sawcer,  Sir  T.  Raym.  15. 

(d)  7  C.  B.  229.  See,  too,  Buckley  v.  Barber.  6  Ex.  164  ;  and 
compare  Morgan  0.  Marquis,  9  Ex.  145. 


WHEN  MAINTAINABLE  BEFORE  THE  JUDICATURE  ACTS.  641 

held,  in  Barton   v.   WUlimna  (c),  that  a   sale  by  one   tenant  in  Bk.  III. 
common  of  the  common  property  gave  the  other  a  right  to  sue  Chap.  10. 
him  at  law  for  a  wrongful  conversion  (/).     The  question,  there-  '_J_ 


fore,   whether  if  one  partner  wrongfully  sold  the  goods  of  the  Barton  v. 
firm,  he  could  or  could  not  be  sued  at  law  by  his  co-partners,  Williams, 
seems  to  have  turned  on  whether  their  demand  in  respect  of  this 
wrongful  sale  could  or  could  not  be  regarded  as  independent  of 
any  question  of  account,  so   as  to  bring  the  case  within  the  ex- 
ception already  noticed. 

Moreover,  a  partner  could  not  maintain  an  action  on  a  bill  of 
exchange  *  drawn  by  himself  on  a  firm  of  which  he  was  a  mem-  [  *  569] 
ber  (g),  and  this  rule  applied  to  all  unincorporated  companies. 

Nor  could  an  action  be  brought  by  one  firm  against  another  Actions  be- 
firm    where    one    or    more     persons    were    partners     in    both  tween  two 
firms    (h).1       Even    where    the    common    partner    was    dead,  nrms  with  a 
the  one  firm  could  not  sue  the  other  in  respect  of  contracts  en-  ^j.^,. 
tered  into  between  the  two  firms  when  he  was  a  partner  in  each 
of  them;  for  no  legal    contract  could  subsist  between  a  person 
and  those  connected  with  him  on  the  one  side,  and  himself  and 
others  connected  with  him  on  the  other  side  (i). 

Fox  v.  Hanbury  (k)  was  the  leading  authority  for  the  rule  that  pox  v 
one  partner  could  not  sue  another  at  law  on  the  ground  that  the  Hanbury. 
other  detained,  and  used  for  his  own    exclusive  purposes,  per-  Trover. 
sonal  property  belonging  to  the   firm;    and  for  the  further  rule 
that  if  one  partner  sold  such  property,  neither  the  other  partners 
nor  their  assignees  in    bankruptcy  could    maintain    an  action 
against  the  purchaser  in  respect  of  his  detention  of  the  goods 
purchased  {!). 

(e)  5  B.  &  A.  395,  affirmed  on  appeal,  Williams  v.  Barton,  3 
Bing.  139.     See,  too,  Farrar  v.  Beswick,  1  M.  &  W.  682. 

(/)  Agreed  to  by  Maule,  J.,  in  Mayhew  v.  Herrick.  7  C.  B. 
247 ;  and  by  Wood,  V.-C,  in  Fraser  ^.'Kershaw,  2  K.  &  JT.  500  ; 
but  see  per  Coltman,  J.,  7  C.  B.  246  and  Jacobs  v.  Seward,  L.  R. 
5  H.  L.  464. 

(g)  Neale  v.  Turton.  4  Bing.  149.  See,  too,  Teague  v.  Hubbard, 
8  B.  &  C.  345,  and  2  Man.  &  Ry.  369. 

(h)  See  Moffat  v.  Van  Millingen,  2  Bos.  &  P.  124,  note;  Main- 
waring  v.  Newman,  ib.  120;  Perring  v.  Hone,  2  C.  &  P.  401,  and 
4  Bing.  28;  Jacaud  v.  French,  12  East,  317;  De  Tastet  v.  Shaw, 
1  B.  &  A.  664. 

(i)  Bosanquet  v.  Wray,  6  Taunt.  597. 

(k)  Cowp.  445.  This  case  was  always  followed  with  approba- 
tion. See  Smith  v.  Stokes,  1  East.  363;  Smith  v.  Oriell,  ib.  368; 
Harvey  v.  Crickett,  5  M.  &  S.  336;  Buckley  v.  Barber,  6  Ex.  164; 
Harper  v.  Godsell,  L.  R.  5  Q.  B.  422. 

(I)  It  seems  from  Morgan  v.  Marquis,  9  Ex.  145,  that  if  a  sol- 
vent partner  sells  goods  of  the  firm,  the  purchaser,  if  he  after- 
wards sells  the  goods,  cannot  be  compelled  to  hand  over  any  part 
of  the  proceeds  to  the  trustee  of  the  insolvent  partners.     Com- 

1  Calhoun  v.  Albin,  48  Mo.  304  (1871)  ;  Tassey  v.  Church,  6 
Watts  &  S.  465  (1843);  Denny  v.  Metcalf,  68  Me.  269  (1878). 

*  18   LAW   OF   PARTNERSHIP. 


642 


ACTIONS  BETWEEN  PARTNERS. 


Bk.  III. 
Chap.  10. 

Sect.  7. 


Action  for 
share  of 
surplus  on 
dissolution. 


Where  a  partnership  had  been  dissolved,  aud  the  winding  np 
of  its  affairs  had  been  entrusted  to  one  or  two  individuals,  and 
they  had  taken  upon  themselves  the  duty  of  getting  in  the  as- 
sets and  paying  the  debts,  and  dividing  the  surplus,  they  could 
not,  under  ordinary  circumstances,  be  compelled  by  proceed- 
ings at  law  to  pay  over  that  surplus  to  those  entitled  to  it  (m). 
If,  indeed,  the  accounts  had  all  been  taken,  and  the  net  balance 
payable  to  any  particular  partner  had  been  ascertained,  and  if 
such  balance  clearly  ought  to  be  paid  over  at  once,  then  an  ac- 
tion for  it  might  be  brought  (n);  but  in  other  cases  recourse 
must  have  been  had  to  a  court  of  equity. 

pare  this  with  Mayhew  v.  Herrick,  7  C.  B.  229,  and  Buckley  v. 
Barber,  6  Ex.  164. 

(m)  Lyon  v.  Haynes,  5  Man.  &  Gr.  504,  and  see  Lewis  v.  Ed- 
wards, 7  M.  &  W.  300,  as  to  a  receiver  suing  for  money  withheld 
from  him  by  those  who  agreed  that  he  should  receive  and  dis- 
tribute it. 

(w)  See  ante,  p.  564. 


DISSOLUTION  OF  PARTNERSHIP.  G43 


BOOK  IY.  [*5™] 


OF  THE  DISSOLUTION  AND  WINDINQ-UP  OF 
PARTNERSHIPS. 


CHAPTER  I. 

CAUSES  OF  DISSOLUTION. 


The  right  to  rescind  a  partnership  for  fraud  has  been  Bk.  IV. 
already  considered  (a).  A  partnership,  however,  which  Chap.  1. 
is  incapable  of  being  repudiated  by  any  of  its  mem- 
bers,  may  be  terminated  by  a  variety  of  events.  Dis- 
regarding (as  not  requiring  special  notice)  mutual  con- 
sent on  the  part  of  all  the  partners,  and  such  events,  if 
any,  as  by  the  partnership  articles  may  be  specially 
made  grounds  of  dissolution,  the  causes  of  a  disso- 
lution of  an  ordinary  partnership  may  be  reduced  to 
the  following,  viz. : — 

1.  The  will  of  any  partner. 

2.  The  impossibility  of  going  on;  in  conse- 

quence of 

(a.)  The  hopeless  state  of  the  partner- 
ship business. 
(6.)  Insanity. 
(c. )  Misconduct. 

3.  The  transfer  of  a  partner's  interest. 

4.  The  occurrence  of  some  event  which  ren- 

ders the  partnership  illegal. 

5.  Death. 

6.  Bankruptcy. 

The  consequences  of  death  and  bankruptcy  will  be 
considered  in  subsequent  chapters;  in  the  present  chap- 
ter the  other  four  events  will  be  dealt  with. 

(a)  Ante,  p.  482. 


614  DISSOLUTION  OF  PARTNERSHIP. 

[*571]  *Section  I. — Will  of  Any  Partner. 

1.  Right  to  dissolve. 

Bk.  IV.  Any  member  of  an  ordinary  partnership,  the  dura- 

Chap.  1.  Sect.  ^on  of  -^hich  is  indefinite,  may  dissolve  it  at  any  moment 

J he  pleases,  and  the  partnership  will  then  be  deemed  to 

continue  only  so  far  as  may  be  necessary  for  the  pur- 
poses of  winding  up  its  then  pending  affairs  (6).1  This 
rule  applies  to  ordinary  mining  partnerships  (c);  and 
as  well  where  there  are  many  as  where  there  are  only  a 
few  partners  (d),  It  also  applies  although  one  of  the 
partners  to  whom  the  notice  is  given  may  be  a  lunatic  (e). 
But  it  is  apprehended  that  the  Court  will  restrain  an 
immediate  dissolution  anc<  sale  of  the  partnership  prop- 
erty, if  it  appears  that  irreparable  mischief  will  ensue 
from  such  a  proceeding  (/). 

But  although  a  partnership  at  will  may  be  dissolved 
by  any  partner,  it  by  no  means  follows  that  he  can  re- 
tain a  premium  which  his  co-partner  may  have  paid 
him,  or  secure  for  his  own  benefit  other  advantages 
which  he  may  desire  (g). 
Form  of  A  notice  that  the  partnership  shall  be  dissolved  must, 

notice,  to  be  effectual,  be  explicit,  and  be  communicated  to  all 

the  partners  (h). ~     The  notice  may  be  prospective  (i). 

(b)  Peacock  v.  Peacock,  16  Ves.  50  ;  Featherstonhaugh  v.  Fen- 
wick,  17  Ves.  298  ;  Crawshay  v.  Maule,  1  Swanst.  508  ;  Ex  parte 
Nokes,  cited  1  Mont.  Part.  108  n.  The  Scottish  law  is  the  same  : 
see  Marshall  v.  Marshall,  3  Ross,  L.  C.  on  Com.  Law,  611. 

(c)  Lees  v.  Jones,  3  Jur.  N.  S.  954,  but  not,  it  is  conceived, 
if  carried  on  on  the  cost-book  principle. 

(d)  Miles  v.  Thomas,  9  Sim.  606. 

(e)  But  in  such  a  case  the  dissolution  cannot  be  carried  out 
without  having  recourse  to  an  action.  See  Mellersh  v.  Keen,  27 
Beav.  236. 

(/)  See  Chavany  v.  Van  Sommer,  3  Woodd.  Lect.  416,  note, 
and  1  Swanst.  512,  note,  and  Blisset  v.  Daniel,  10  Ha.  493.  See 
also  Neilson  v.  Mossend  Iron  Co.,  11  A  pp.  Ca.  298,  a  Scotch  case. 
By  the  civil  law  a  dissolution  made  maid  fide,  and  at  an  unsea- 
sonable time,  is  not  allowed.     See  Pothier,  Partn.  §  150. 

(g)  As  to  the  premium,  see  ante,  p.  64,  and  as  to  retaining  the 
benefit  of  a  renewed  lease,  Clegg  v.  Edmondson,  8  De  G.  Mc.  & 
G.  787. 

{h)  Van  Sandau  v.  Moore,  1  Russ.  463  ;  Wheeler  v.  Van  Wart, 
9  Sim.  193,  and  2  Jur.  252,  where  the  notice  was  left  at  the  office; 
Parsons  v.  Hay  ward,  31  Beav.  199,  and  4  De  G.  F.  &  J.  474. 

(i)  Mellersh  v.  Keen,  27  Beav.  236. 

Fletcher  v.  Reed.  131  Mass.  312  (1881);  McElvev  v.  Lewis.  76 
N.  Y.  373  (1879);  Whiting  r.  Leakin,  66  Md.  255  (1881);  Howell 
v.  Harvey,  5  Ark.  279  (1843).  It  makes  no  difference  that  one 
of  the  partners  has  paid  a  bonus  to  secure  his  admission  into  the 
firm.     Carlton  v.  Cummings.  51  Ind.  47S  (1873). 

-'Eagle  v.  Bucher,  6  Oh.  St.  295  (1856). 


AT  WILL  OF  ANY  PARTNER.  645 

A  proposal  to  *  dissolve  on  terms  which  are  not  ac-  [  *  572] 

cepted,  does  not  amount  to  a  dissolution  (k).  Nor  does  Bk.  IV. 

a  notice  that  a  partner's  share  has  been  forfeited  ;  for  Chap.  l.Seei. 

by  such  notice  it  is  not  intended  that  the  partnership  _J 

shall  be  considered  as  dissolved  as  to  all  the  partners, 
but  only  that  the  one  partner  shall  have  no  farther  in- 
terest in  it  (I).  An  answer  to  a  bill  in  chancery  has 
been  held  sufficient  notice  (m). 

It  has  never  been  determined  that  a  partnership  con-  Where  part- 
stituted  by  deed  can  only  be  dissolved  either  by  deed  ners'uP  is 
or  by  operation  of  law  :  and  it  is  apprehended  that  no  |°u*j '  ,j  e( 
deed  is  requisite.1     In  Doe  v.  Miles    (n)   the  question  Doe      ^jjles 
was  raised  ;  but  as  the  partners  had  all  signed  a  notice 
advertising  a  dissolution,  Lord  Ellenborough  presumed 
that  it  had  been  effected  with  all  due  solemnity.     It  is 
clear  from  the  report  that  there  was,  in  fact,  no  deed 
of  dissolution,  but  there  may  have  been  in  the  articles 
some  clause  providing  for  a  dissolution  otherwise   than 
by  deed. 

A  dissolution  of  a   partnership   at  will   may   be  in-  Dissolution 
ferred  from  circumstances,  e.  g.,  a  quarrel,  although  no  inferred. 
notice  to  dissolve  may  have  been  given  (o).2 

A  notice  once  given  cannot   be  withdrawn   without  Withdrawal 
consent  (p).  of  notice. 

If  a  partnership  is  a  partnership  at  will,  and  a  mem-  Time  from 
ber  brings  an  action  for  dissolution  without  an  previous  which  dis- 
notice,  the  writ  is  treated  as  notice  to  dissolve  and  the 
dissolution  will  date  from  its  service.  In  other  cases 
of  dissolution  by  notice  the  dissolution  will  date  from 
the  day  the  notice  was  given,  or  from  the  time  mention- 
ed in  it  for  dissolution,  as  the  case  may  be  (q).3 

(fc)  Hall  v.  Hall,  12  Beav.  414. 

(?)  See  Hart  v.  Clarke,  6  De  G.  M.  &  G.  232. 

(m)  Svers  v.  Svers,  1  App.  Ca.  174. 

(n)  4  Camp.  373,  and  1  Stark.  181.  In  Hutchinson  v.  Whit- 
field, Haves  (Ir.  Ex.),  78,  it  was  agreed  that  the  partnership 
should  be  dissolved  by  deed  only  ;  but  it  was  held  that  an  award 
dissolving  tbe  partnership  was  valid,  the  submission  being  under 
seal. 

(o)  Pearce  v.  Lindsay,  3  De  G.  J.  &  Sm.  139. 

(/))  Jones  v.  Lloyd,  18  Eq.  265. 

(q)  See  Robertson  v.  Lockie,  15  Sim.  285;  Bagshaw  v.  Parker, 
10  Beav.  532  ;  Mellersh  v.  Keen,  27  Beav.  236. 

1  It  has  been  decided  that  the  dissolution  of  such  a  partner- 
nershipcan  be  proved  bv  parol,  Dickinson  v.  Bold,  3  Desaus,  501 
(1811);  Wood  r.  Gault,  2  Md.  Ch.  433  (1850). 

2  Abbott  v.  Johnson,  32  N.  H.  9  (1855). 

3  It  is  a  disputed  question  whether  one  partner  can  dissolve  a 
partnership  entered  into  fur  a  certain  period  before  the  expira- 
tion of  its  term.  In  Slemmer's  Appeal,  58  Pa.  St.  168,  Solomon 
v.  Kirkwood,   55  Mich.  256  (1884)  and  Skinner   v.   Dayton,    19 


solution 
dates. 


646 


DISSOLUTION  OF  PARTNERSHIP. 


[  *  573] 

Bk.  IV. 

Chap.  1.  Sect. 
1. 

Right  of 
partner  to 
retire  from 
firm. 


Right  to 
retire  from 
insolvent 
firm. 


*  2.   Of  the  right  to  retire. 

Subject  to  a  qualification  which  will  be  presently 
mentioned,  a  member  of  an  ordinary  firm  can  surren- 
der his  share  and  interest  in  the  firm  to  his  co-part- 
ners, or  any  of  them,  upon  any  terms  to  which  he  and 
they  may  all  agree.  But  there  is  only  one  method  by 
which  a  partner  can  retire  from  a  firm  without  the  con- 
sent of  his  co-partners,  and  that  is,  by  dissolving  the 
firm.  In  order  to  avoid  the  necessity  of  a  general  dis- 
solution when  a  partner  may  wish  to  retire,  special  pro- 
visions are  frequently  introduced  into  partnership  ar- 
ticles; but  it  is  not  unfrequently  found  that,  owing  to 
unforeseen  circumstances,  these  provisions  cannot  be 
carried  into  effect;  and  when  that  is  the  case,  a  disso- 
lution, with  its  usual  consequences,  must  take  place  if 
a  partner  is  to  retire  otherwise  than  by  the  consent  of 
his  co -partners  (r).1 

The  qualification  above  alluded  to  has  relation  to  a 
partner's  retirement  from  an  insolvent  firm.  A  part- 
ner desirous  of  retiring  from  an  insolvent  firm,  is  at 
perfect  liberty  to  sell  his  interest  in  it  for  any  sum  the 
continuing  partners  think  proper  to  give  him;  and  a 
sale  by  him  to  them  cannot  be  set  aside  or  impeached 
as  a  fraud  upon  the  creditors  of  the  firm  unless  there 
be  clear  evidence  aliunde  of  such  fraud  (s).  At  the 
same  time,  the  present  share  of  a  partner  in  an  insolv- 
ent firm  (t)  is  obviously  less  than  nothing,  whatever 
may  be  the  amount  of  the  capital  brought  in  by  him. 
Consequently  a  partner  who  retires  from  an  insolvent 
firm  and  withdraws  from  it  a  sum  of  money  which  he 

(r)  See  Cook  v.  Collin gridge,  Jac.  607;  Kershaw  v.  Matthews, 

2  Russ.  62;  Madgwick  v.  Wimble,  6  Beav.  495;  Downs  v.  Col- 
lins, 6  Ha.  418.  Compare  Simmons  v.  Leonard,  3  Ha.  581 ;  Pet- 
tvt  r.  Janeson,  6  Madd.  146. 

(s)  See  Ex  parte  Peake,  1  Madd.  346;  Parker  v.  Ramsbottom, 

3  B.  &  C.  257;  Ex  parte  Birch,  2  Ves.  J.  260,  note;  Ex  parte  Car- 
penter, Mont.  &  McAr.  1. 

(/)  An  insolvent  firm  is  one  in  which  the  joint  assets  are  less 
than  the  joint  liabilities.  Such  a  firm  is  insolvent  whatever  the 
wealth  of  the  individual  partners  composing  it  may  be,  see 
Mont.  &  McAr.  p.  5. 

Johns.  513,  538  (1822);  it  was  said  that  he  can  do  so,  subject  to 
a  liability  to  answer  in  damages  for  his  breach  of  contract.  In 
Berry  v.  Folkes,  60  Miss.  507  (1866):  Johnston  v.  Dutton,  27  Ala, 
245  (1855);  Hartman  v.  Woehr,  18  N.  J.  Eq.  383  (1867);  Cole  v. 

Moxley,  12  W.  Va.  730  ( );  and  Kinloch  v.  Hamlin,   2  Hill, 

(S.  Ca.)  Ch.  19  ( );  it  was  held  that  he  cannot  dissolve  such 

a  partnership  before  the  appointed  term  is  ended. 

1  That  the  withdrawal  of  a  partner  dissolves  the  firm,  see 
White  v.  White,  5  Gill.  359  (1847). 


RIGHT  TO  RETIRE.  647 

is  pleased  to  call  his  share,  is  defrauding  the  creditors  Bk.  IV. 

of  the  firm;  and  such  a  transaction  cannot  stand,  and  Chap.  1.  Sect. 

may  be  impeached  by  the  trustee  in  bankruptcy  of  the  J 

*  continuing  firm  (u).1  To  proceedings  instituted  by  [  *  574] 
the  trustee  to  impeach  such  a  transaction,  it  is  no  an- 
swer to  say,  that  the  bankrupts  themselves  were  bound, 
by  it;  for  the  trustee  represents  the  creditors,  and  can 
impeach  any  transaction  which  is  a  fraud  as  against 
them,  although  the  bankrupts  themselves  might  not  be 
in  a  position  to  do  so  (x).  Upon  similar  grounds,  if  a 
partner  relinquishes  his  share  in  a  partnership  to  his 
co  partners,  upon  such  terms  and  under  such  circum- 
stances as  to  render  that  relinquishment  a  fraud  upon 
his  creditors,  and  he  then  becomes  bankrupt,  his  trus- 
tee will  be  entitled  to  rescind  the  transaction. 

Laying  aside,  however,  ail   such    considerations  as  General  rules 
these,  it  may  be  said —  as  to  retir- 

1.  That  it  is  competent  for  a  partner  to  retire  with  iQg- 
the  consent  of  his  co- partners  at  any  time  and  upon 
any  terms; 

2.  That  it  is  competent  for  him  to  retire  without 
their  consent  by  dissolving  the  firm,  if  he  is  in  a  posi- 
tion to  dissolve  it; 

3.  That  it  is  not  competent  for  a  partner  to  retire 
from  a  partnership  which  he  cannot  dissolve,  and  from 
which  his  co-partners  are  not  willing  that  he  should 
retire. 

3.   Of  the  right  to  expel. 

In  the  absence  of  an  express  agreement  to  that  effect,  Right  to 
there  is  no  right  on  the  part  of  any  of  the  members  of  expel  a 
an  ordinary  partnership  to  expel  any  other  member,  partner. 
Nor,  in  the  absence  of  express  agreement,  can  any  of 
the  members  of  an    ordinary  partnership  forfeit  the 
share  of  any  other  member,  or  compel  him  to  quit  the 
firm  on  taking  what  is   due  to    him.     As   there  is   no 
method,  except  a  dissolution,  by   which  a  partner  can 
retire  against  the  will  of  his  co-partners,  so  there  is  no 
method  except  a  dissolution    by  which  one  partner  can 
be  got  rid  of  against  his  own  will  (y). 

(u)  See  Sanderson  v.  Maltby,  4  Bro.  C.  C.  423,  and  2  Ve.s.  J. 
244;  Re  Kemptner,  8  Eq.  286;  and  ante,  p.  338. 

{x)  lb.,  and  see  Billiter  v.  Young,  6  E.  &  B.  40;  Tyrrell  v. 
Hope,  2  Atk.  562. 

(y)  See  Hart  v.  Clarke,  6  De  G.  M.  &  G.  232,  and  on  appeal, 

1  See  Anderson  v.  Albrecht,  11  Md.  563  (1857);  Ransom  v. 
Van  Derventer,  41  Barb.  307(1863);  Johnson  v.  Strauss,  26  Fed. 
Rep.  57(1882);  Phelps  v.  McNeely,  66  Mo.  554(1877). 


648  DISSOLUTION  OF  PARTNERSHIP. 

[  *  575]  *  The  consequence  of  this  is,  that  when  partners  dis- 

Bk.  IV.  agree  and  cannot  dissolve  except  with  the  concurrence 

Chap.  l.Sect.  0f  aii^  jj.  jg  no^  urmsual  for  some  of  them  so  to  conduct 

J themselves  towards  another  as,  if  possible,  to  drive  him 

Driving  a        to  agree  to  a  dissolution.     But  it  need  hardly  be  said 
partner  to  a    ^at  a  scheme  of  this  kind  will,  if  possible,  be  frus- 
trated ;  and  redress  may  be  obtained  in  such  a  case 
without  dissolving  the  partnership  (z). 
Exercise  of         With  a  view  to  facilitate  the  removal  of  a  partner  who 
powers  of        misconducts  himself,  it  is  not  unfrequently  agreed  that 
expu  sion.       a  pQwer  j.Q  expej  shall  be  exerciseable  in  certain  events 
and  under  certain  restrictions.    These  expulsion  clauses, 
as  they  are  termed,  have  been  already  alluded  to  in  the 
chapter  on  the  construction  of  partnership  agreements; 
but  it  may  be  observed  in  passing,  that  such  clauses  are 
always  construed  stiictly,  and  that  no  expulsion  under 
them  will  be  effectual  unless  the    expelling    partners 
have  acted  with  perfect  good  faith  (a).1 


Section  II. — Impossibility  of  Going  on. 

IniDossibilitv  Even  if  the  duration  of  the  partnership  is  denned, 
of  going  on.  circumstances  may  arise  giving  a  partner  a  right  to 
have  the  partnership  dissolved  before  the  expiration  of 
the  time  for  which  it  was  originally  agreed  to  last. 
But  there  must  be  some  special  circumstance  to  justify 
a  dissolution  of  a  partnership  before  the  term  for  which 
it  was  entered  into  has  expired  (6).  Any  circumstance, 
however,  which  renders  the  continuance  of  the  partner- 
ship, or  the  attainment  of  the  common  end  with  a  view 
to  which  it  was  entered  into,  practically  impossible, 
would  seem  upon  principle  to  warrant  a  dissolution  (c). 
The  particular  circumstances  which  have  given  rise  to 
litigation,  and  upon  which  partnerships  have  been 
judicially  dissolved,  are  : — 
T  *  5761  *  1-  The  hopeless  state  of  the  partnership  business  ; 

2.  The  confirmed  lunacy  of  one  of  the  partners  ;  and 

Cfarke  v.  Hart,  6  H.  L.  C.  633;  Crawshay  v.  Collins,  15  Ves.  226; 
Featherstonhaugh  v.  Fen  wick.  17  ib.  309. 

(z)  See  Fairthorne  v.  Weston,  3  Ha.  387  ;  and  ante,  p.  497. 

(a)  See  Blisset  v.  Daniel,  10  Ha.  493;  Wood  v.  Woad,  L.  R.  9 
Ex.  190  :  Stewart  v.  Gladstone,  10  Ch.  D.  626  ;  Russell  v.  Rus- 
sell, 14  ib.  471  ;  ante,  p.  426,  &c. 

(b)  See  Warner  v.  Cunningham,  3  Dow.  76. 

(c)  See  Harrison  v.  Tennant,  21  Beav.  482  ;  Electric  Telegraph 
Co.  of  Ireland,  22  Beav.  471. 

1  The  burden  of  proving  the  right  to  expel  lies  on  the  partner 
who  has  exercised  it.     Patterson  v.  Silliman,  28  Pa.  St.  304  (1857). 


CAUSES  OF  DISSOLUTION.  649 

3.  Misconduct  on  the  part  of  one    or  more  of   the  Bk.  IY. 
members  of  the  firm,  and  the  destruction  of  mutual  Chap.  1.  Sect. 
confidence.  J 

Each  of  these  grounds  of  dissolution  require  to  be 
more  fully  noticed. 

1.  As  to  the  hopeless  state  of  the  partnership  business. 

In  Baring  v.  Dix  (d)  a  partnership  was  formed  be-  i.  insol- 
tween  three  persons  for  the  purpose  of  spinning  cotton  vency. 
under  a  certain  patent.     The  patented  invention  proved  Baring  v. 
a  failure,  and  two  of  the  partners  thereupon  desired  to  Dix- 
wind  up  the  affairs  of  the  partnership  and  to  sell  its 
mills,  but  this  was  opposed  by  the  other  partner.     How- 
ever, on  a  bill  filed  against  him  the  Court  referred  it  to 
the  master  to  inquire  and  state  whether  the  partnership 
business  could  be  carried  on  according  to  the  true  in- 
tent and  meaning  of  the  articles  of  co-partnership,  and 
declared  that,  on  a  report  in  the  negative,   a   decree 
would  be  made  for  a  dissolution  of    the  partnership 
and  a  sale  of  its  property.     It  does  not  appear  in  this 
case  whether  the  partnership  had  been  entered  into  for 
a  definite  time  or  not,  nor  whether  the  capital  of  the 
firm  had  been  expended  or  not. 

In  a  more  recent  and  more  important  case,  however,  Loss  of 
the  Court  recognised  the  fact  that  expectation  of  profit  capital, 
is   implied  in  every  partnership,  and    held  that,  if  a  Jennings  v. 
partnership  is  entered  into  for  a  term  of  years,  and  the  Baddeley- 
capital  originally  agreed  to  be  furnished  has  been  all 
spent,  and  some  of  the  partners  are  unable  or  unwill- 
ing to  advance  more  money,  and  at  the  same  time  the 
concern  cannot  go  on  except  at  a  loss  unless  they  do, 
the  partnership  will  be  dissolved  (e).     Under  such  cir- 
cumstances as  these  it  is  unimportant  whether  the  con- 
cern is  already  embarrassed  or  not.     After  everything 
has  been  done  which  was  agreed  to  be  done,  and  cer- 
tain loss  is  the  only  result  of  going  *  on,  any  partner  [  *  577] 
is  entitled  to  have  the  concern  dissolved,  although  he 
may  have  agreed  that  tbe  partnership  should  continue 
for  some  definite  time  and  that  time   has  not  yet  ex- 
pired (/). 

If,  in  a  case  of  this  description,  the  firm  is  already 
insolvent  and  becomes  more  and  more  so  every  day, 
the  Court  will  interfere  on  motion,  and  appoint  a  per- 

(d)  1  Cox,  213. 

(e)  Jennings  r.  Baddeley,  3  K.  &  J.  78,  a  case  of  a  mine.  See, 
also,  Wilson  v.  Church,  13  Ch.  D.  1,  and  S.  C,  under  the  name 
of  National  Bolivian  Navigation  Co.  v.  Wilsou,  5  App,  Ca.  170. 

(/)  Ibid. 


650 


CAUSES  OF  DISSOLUTION. 


Bk.  IV.  ^        son  to  sell  the  business  and  wind  up  the  affairs  of  the 
Chap.  l.Sect.  partnership,  although  it  is  not  usual  to  grant  such  re- 

~J_ .  lief  until  the  hearing  of  the  cause  (g).1 

Bankruptcy.  If  a  firm  of  partners,  or  even  any  one  member  of  the 
firm,  is  adjudged  bankrupt,  the  firm  is  dissolved  ;2  not 
only  because  it  is  impossible  for  the  business  of  the 
firm  to  be  carried  on,  but  because  there  is  a  transfer  of 
each  bankrupt's  interest  to  his  trustee  (h). 

2.  As  to  the  Insanity  of  one  of  the  Partners. 

2.  Lunacy.  The  lunacy  of  a  partner  does  not  itself  dissolve  the 

firm  ;3  but  the  confirmed  lunacy  of  an  active  partner  is 
sufficient  to  induce  the  Court  to  order  a  dissolution,  not 
only  for  the  purpose  of  protecting  the  lunatic  (i),  but 
also  for  the  purpose  of  relieving  his  co-partners  from 
the  difficult  position  in  which  the  lunacy  places  them  (k). 

Jones  v.  Noy.  In  a  leading  case  on  this  subject,  two  persons  agreed 
to  become  partners  as  solicitors  for  twelve  years  ;  one 
of  them  became  lunatic  before  the  twelve  years  were 
out,  and  subsequently  died.  His  co-partner  continued 
to  carry  on  the  business  for  some  time  ;  but  he  eventu- 
ally sold  it  ;  and  it  was  held,  that  the  legal  personal 
representative  of  the  lunatic  was  entitled  to  a  share  of 
the  profits  up  to  the  time  of  the  sale  (I).  In  deliver- 
ing judgment  the  Court  observed  : 

"It  is  clear  upon  principle  that  the  complete  incapacity  of  a 
party  to  an  agreement  to  perform  that  which  was  a  condition  of 

(g)  Bailey  v.  Ford.  13  Sim.  495. 

(h)  See  post,  p.  583,  under  the  head  Transfer  of  Interest. 

(0  Jones  v.   Lloyd,  18  Eq.  265. 

(k)  See  Saver  v.  Bennett.  1  Cox.  107  ;  Wrexham  v.  Hudleston, 
1  Sw.  514,  note  ;  Jones  v.  Noy,  2  M.  &  K.  125  ;  Sadler  v.  Lee,  6 
Beav.  324  ;  Leaf  v.  Coles,  1  De  G.  M.  &  G.  171  ;  Anon,  2  K.  & 
J.  441  ;'and  Lord  Eldon's  observations  in  Waters  v.  Taylor,  2  V. 
&  B.  303. 

(1)  Jones  v.  Noy,  2  M.  &  K.  125. 

1  Hopelessness  of  the  firm's  success  has  been  frequently  recog- 
nized by  the  American  courts  as  a  ground  for  dissolution  of  the 
partnership.  For  examples,  see  Jackson  v.  Deese,  35  Ga.  84 
(1866);  Moies  v.  O'Neill,  23  N.  J.  Eq.  207  (1872);  Brown  v. 
Hicks,  8  Fed.  Rep.  155  (1881). 

2  Blackwellu  Claywell,  75  N.  Ca.  213  (1876);  Marquand  v. 
N.  Y.  Mfg.  Co.,  17  Johns.  525  (1820);  Wilkins  r.  Davis,  15  Bank. 
Eeg.  60(1876). 

3  That  the  insanity  of  a  partner  does  ipso  facto  dissolve  his  firm 
is  held  in  Isler  v.  Baker,  6  Humph.  (Tenn.)85  (1845).  This  doc- 
trine is  supported  by  dicta  in  The  Cape  Sable  Co.'s  case,  3  Bland 
(Md.)  (Ch.),  606  (1823).  and  Griswold  v.  Waddington,  15  Johns. 
57(1817).  But  Raymond  v.  Vaughn,  17  111.  App.  144  (1885),  is 
in  accordance  with  the  view  taken  in  the  text. 


LUNACY.  651 

the  agreement  is  a  *  ground  for  determining  the  contract.     The  [  *  578] 
insanity  of  a  partner  is  a  ground  for  the  dissolution  of  the  part-  Bk.  IV. 
nership,  because  it  is  immediate  incapacity  ;  but  it  may  not  in  Chap.  1.  Sect. 

the  result  prove  to  be  a  ground  of  dissolution,  for  the  partner  J 

may  recover  from  his  malady.  When  a  partner  therefore  is  af- 
fected with  insanity,  the  continuing  partner  may,  if  he  think 
fit,  make  it  aground  of  dissolution,  but  in  that  case  I  consider 
with  Lord  Kenyon,  that  in  order  to  make  it  a  ground  of  disso- 
lution he  must  obtain  a  decree  of  the  Court.  If  he  does  not  ap- 
ply to  the  Court  for  a  decree  of  dissolution,  it  is  to  be  considered 
that  he  is  willing  to  wait  to  see  whether  the  incapacity  of  his 
partner  may  not  prove  merely  temporary.  If  he  carry  on  the 
partnership  business  in  the  expectation  that  his  partner  may  re- 
cover from  his  insanity,  so  long  as  he  continues  the  business  with 
that  expectation  or  hope,  there  can  be  no  dissolution." 

In  Roiclands  v.  Evans  and  Williams  v.  Rowlands  (m),  Rowlands  v. 
one  of  three  partners  in  a  mine  had  become  lunatic  and  ^'.an.s'  an<* 
committees  of  his  estate  had  been  appointed.  A  bill  Rowlands.*" 
was  filed  by  one  of  the  sane  partners  for  a  dissolution; 
and  a  cross  bill  was  filed  by  the  committees  of  the  luna- 
tic, for  he  appointment  of  a  manager,  on  the  ground 
that  the  affairs  of  the  partnership  could  be  carried  on 
advantageously  to  all  parties,  notwithstanding  the 
lunacy.  There  was  evidence  to  show  that  this  was 
true  ;'  but  the  Master  of  the  Eolls  held  that  the  partner- 
ship must  be  dissolved,  and  that  the  Court  could  not 
appoint  a  manager  to  carry  on  the  concern  for  the  bene- 
fit of  the  lunatic's  estate.  The  partnership  property 
was  ordered  to  be  sold  as  a  going  concern,  with  liberty 
to  all  parties  to  bid,  and  a  receiver  and  manager  was 
appointed  until  the  sale.  t 

In  order  to  induce  the  Court  to  order  a  dissolution  on  Evidence  of 
the  ground  of  the  insanity  of  one  of  the  partners,  the  lunacy. 
Court  must  be  satisfied  by  clear  evidence  that  the  in- 
sanity exists  and  is  incurable  (n);  a  temporary  illness 
is  not  sufficient  (o);  and  notwithstanding  strong  evi- 
dence as  to  the  past,  the  Court  requires  to  be  convinced 
that  the  insanity  exists  at  the  time  its  interference  is 
called  for,  and  it  will   therefore,  if   necessary,  *  before  [  *  579] 

(m)  30  Beav.  302.  In  the  same  case,  it  was  held  that  the  com- 
mittees could  not  exercise  an  option  which  the  lunatic  had  of 
buying  the  share  of  one  of  his  co-partners.  The  right  of  pre- 
emption had  accrued  to  the  lunatic  before  his  lunacy,  and  that 
event  occurred  before  the  time  for  exercising  the  option  had  ex- 
pired. 

(n)  See  Kirby  v.  Carr,  3  Y.  &  C.  Ex.  184  ;  Anon,  2K.  &  J.  111. 

(o)  Seethe  last  note,  and  Whitwell  v.  Arthur,  35  Beav.  140; 
Huddleston's  case,  cited  2  Ves.  sen.  34  and  Sayer  v.  Beuuet,  1 
Cox,  107. 


652 


CAUSES  OF  DISSOLUTION. 


Bk.  IV. 
Chap.  1.  Sect. 
2. 


Date  of  dis- 
solution. 


Kirby  v. 
Carr. 


Costs. 
Lunacy 

[  *  580] 


making  an  order,  direct  an  inquiry  whether  the  alleged 
lunatic  is  in  such  a  state  of  mind  as  to  be  able  to  con- 
duct the  business  of  the  firm  in  partnership  with  the 
other  members,  according  to  the  articles  of  partner- 
ship (p).  But  no  such  inquiry  is  necessary  where  the 
partner  is  a  lunatic  and  so  found  by  inquisition  (q).1 

A  lunatic  partner  not  so  found  by  inquisition  is  en- 
titled to  bring  an  action  (by  a  next  friend)  for  a  disso- 
lution, but  it  is  doubtful  whether  the  partnership  can 
be  completely  wound  up  in  the  absence  of  a  com- 
mittee (r). 

In  ordering  a  dissolution  of  a  partnership,  not  at  will, 
on  the  ground  of  insanity,  the  Court  declares  the  part- 
nership dissolved  as  from  the  date  of  the  judgment,  and 
not  from  a  prior  day  (s).  But  if  the  articles  of  partner- 
ship authorise  a  dissolution  and  the  partnership  has 
been  dissolved  under  the  articles, — which  may  be  done 
notwithstanding  the  insanity  of  one  of  the  partners  (t), — 
the  dissolution  must  date  from  the  time  at  which  the 
partnership  was  so  dissolved,  and  not  from  the  date  of 
the  judgment  (u).  "Where  a  partnership  is  at  will,  and 
notice  to  dissolve  has  been  given,  the  dissolution  will 
be  ordered  as  from  the  time  fixed  by  the  notice  (x). 
It  was  probably  on  the  ground  that  a  partnership  at 
will  is  determinable  on  notice,  that  in  Kirby  v.  Carr  (y) 
the  dissolution  was  decreed  as  from  the  filing  of  the 
bill,  no  previous  notice  having  been  given. 

AVhen  the  Court  dissolves  a  partnership  on  the 
ground  of  insanity,  it  directs  the  costs  to  be  paid  out 
of  the  partnership  assets  (z). 

By  the  Lunacy  regulation  act,  16  &  17  Yict.  c.  70, 
§  123,  *  it  is  enacted  that,  "  where  a  person,  being  a 

(p)  See  Anon.,  2  K.  &  J.  441  ;  Kirby  v.  Carr.  3  Y.  &  C.  Ex. 
184,  and  Sayer  v.  Bennet,  1  Cox,  107,  in  -which  two  last  cases  the 
partnership  was  a  partnership  at  will. 

(q)  Milne  v.  Bartlet.  3  Jur.  358. 

(r)  Jones  r.  Llovd,  18  Eq.  265. 

(s)  Besch  v.  Frolich,  1  Ph.  172.  In  Sander  v.  Sander.  2  Coll. 
276,  and  Jones  v.  Welch,  1  K.  &  J.  765,  the  dissolution  was  also 
from  the  date  of  the  decree,  but  the  reports  do  not  show  whether 
the  partnerships  were  at  will  or  not. 

(t)  Robertson  v.  Lockie,  15  Sm.  285;  and  see  Mellersh  r.  Keen, 
27  Beav.  236. 

(u)  See  Robertson  v.  Lockie,  15  Sim.  285;  Bagshaw  v.  Paiker, 
10  Beav.  532. 

(.el  Mellersh  v.  Keen.  27  Beav.  236. 

(y)  3  Y.  &  C.  Ex.  184.  See,  also,  Shepherd  v.  Allen,  33  Beav. 
577. 

(z)  Jones  v.  Welch,  1  K.  &  J.  765. 

1  Griswold  v.  Waddington,  15  Johns.  57  (1817). 


misconduct.  653 

member  of  a  co-partnership  firm,  becomes   lunatic,  the  Bk.  IV. 
Lord  Chancellor  may,  by  order  made  on  the  application  ChaP-  *•  Sect- 

of  the   partner   or  partners  of   the  lunatic,  or  of   such  "1 

other  person  or  persons  as  the  Lord  Chancellor  shall  regulation 
think  entitled  to  require  the  same,  dissolve  the  partner-  act- 
ship  ;  and  thereupon,  or  upon  a  dissolution  of  the 
partnership  by  decree  of  the  Court  of  Chancery,  or 
otherwise  by  due  course  of  law,  the  committee  of  the 
estate,  in  the  name  and  on  behalf  of  the  lunatic,  may 
join  and  concur  with  such  other  person  or  persons  in 
disposing  of  the  partnership  property,  as  well  real  as 
personal,  to  such  persons,  upon  such  terms,  and  in  such 
manner,  and  may  and  shall  execute  and  do  such  con- 
veyances and  things  for  effectuating  this  present  pro- 
vision, and  apply  the  monies  payable  to  the  lunatic  in 
respect  of  his  share  and  interest  in  the  co-partnership, 
in  such  manner  as  the  Lord  Chancellor  shall  order." 

3.  As  to  misconduct  and  destruction  of  mutual  con- 
fidence. 

The  Court  will  dissolve  a  partnership  on  the  ground  3.  Miscon- 
tbat  a  partner  so  seriously  misconducts  himself  as  to  duct- 
render  it  impossible  for  his  co-partners  to  continue  to 
act  with  him  (a).  But  it  is  not  considered  to  be  the 
duty  of  the  Court  to  enter  into  partnership  squabbles, 
and  it  will  not  dissolve  a  partnership  on  the  ground  of 
the  ill-temper  or  misconduct  of  one  or  more  of  the 
partners,  unless  the  others  are  in  effect  excluded  from 
the  concern  (b);  or  unless  the  misconduct  is  of  such  a 
nature  as  utterly  to  destroy  the  nmtual  confidence 
which  must  subsist  between  partners  if  they  are  to  con- 
tinue to  carry  on  their  business  together  (c).  'Where a 
dissolution  is  sought  on  this  latter  ground,  it  would 
seem  that  the  misconduct  must  be  *  such  as  to  affect  [  *  581] 
the  business  not  merely  by  shaking  its  credit  in  the 
eyes  of  the  world,  but  by  rendering  it  impossible  for 
the  partners  to  conduct  their  business  together  accord- 
ing to  the  agreement  into  which  they  have  entered  (d). 

(«)  See  Smith  v.  Jeves.  4  Beav.  502  ;  Waters  v.  Taylor,  2  V.  & 
B.  299  ;  Charlton  v.  Poulter,  19  Ves.  148,  note. 

i //i  See  Goodman  v.  Whitcomb,  1  Jac.  &  W.  589;  Marshall  v. 
Colinan,  2  ib.  266  ;  Wray  v.  Hutchinson.  2  M.  &  K.  235;  Roberts 
v.  Eberhart,  Kay,  148. 

(c)  See  Smith  v.  Jeyes,  4  Beav.  502  Harrison  v.  Tennant,  21 
Beav.  482;  Liardet  v.  Adams,  1  Mont.  Part.  112,  note,  where 
Lord  Thurlow  is  reported  to  have  said  he  did  not  see  what  degree 
of  misconduct  was  to  be  held  sufficient  ground  for  dissolving  a 
partnership. 

(d)  See  Anon,  2  K.  &  J.  441,  where  a  partner  had  attempted 
suicide. 


G54 


CAUSES  OF  DISSOLUTION. 


Bk.  IV. 
Chap.  1.  Sect. 
2. 

Degree  of 
misconduct. 


Harrison  v. 
Tennant. 


[  *  582] 


Most  of  the  cases  on  this  subject  have  become  before 
the  Court  on  a  motion  for  an  injunction  to  restrain  a 
partner  from  acting  improperly,  and  have  been  alluded 
to  when  the  remedy  by  injunction  was  considered  (e). 
It  may,  however,  be  usefully  observed  here  that  keep- 
ing erroneous  accounts  and  not  entering  receipts  (f),1 
refusal  to  meet*  on  matters  of  business  (g),  continued 
quarrelling,  and  such  a  state  of  animosity  as  precludes 
all  reasonable  hope  of  reconciliation  and  friendly  co- 
operation (h),  have  been  held  sufficient  to  justify  a  dis- 
solution. It  is  not  necessary,  in  order  to  induce  the 
Court  to  interfere,  to  show  personal  rudeness  on  the 
part  of  one  partner  to  the  other,  or  even  any  gross  mis- 
conduct as  a  partner.  All  that  is  necessary  is  to  satisfy 
the  Court  that  it  is  impossible  for  the  partners  to  place 
that  confidence  in  each  other  which  each  has  a  right  to 
expect,  and  that  such  impossibility  has  not  been  caused 
by  the  person  seeking  to  take  advantage  of  it.  A  strong 
illustration  of  this  is  afforded  by  Harrison  v.  Ten- 
nant (i).  In  that  case  three  persons,  A.,  B.,  and  C, 
entered  into  partnership  as  solicitors  for  twenty-one 
years.  A.  and  B.  had  been  in  practice  as  partners  be- 
fore the  partnership  of  A.,  B.,  and  C.  commenced,  and 
were  sued  in  Chancery  in  respect  of  matters  which  had 
arisen  in  the  course  of  such  practice.  In  this  suit  A. 
was  charged,  after  the  formation  of  the  firm  A.,  B.,  and 
C,  with  gross  misconduct  and  with  fraud.  B.  and  C. 
wished  to  have  A.'s  answer  settled  in  consultation,  but 
A.  declined,  made  himself  the  sole  solicitor  on  the  rec- 
ord instead  of  the  firm,  and  put  in  his  answer  without 
further  consulting  his  co-partners.  B.  and  C.  filed  a 
bill  against  A.  for  a  dissol  ution,  and  sent  *  circulars  to 
their  clients  stating  that  they  had  taken  steps  to  dis- 
solve the  partnership  existing  between  themselves  and 
A.,  in  consequence  of  the  grave  charges  made  against 
him  in  the  suit  above  referred  to.  A.  resisted  the  ap- 
plication for  a  dissolution  on  the  ground  that  he  had 
not  been  guilty  of  any  misconduct  towards  his  co-part- 
ners in  the  business  of  the  firm,  nor  of  any  breach  of 
the  articles  of  partnership.     But  a  dissolution  was  de- 


(e)  Ante,  p.  538  et  seq. 

if)  Cheesenian  v.  Price,  35  Beav.  142. 

(g)  De  Berenger  v.  Hamel,  7  Jar.  Bvth.  25.  ed.  2. 

(h)  Baxter  ».  West,  1  Dr.  &  Sin.  173;  Watney  v.  Wells,  30 
Beav.  56;  Pease  v.  Hewitt,  31  Beav.  22:  Learyr.  Shout.  33  Beav. 
582. 

(*)  21  Beav.  482. 

1  Cottle  v.  Leitch,  35  Cal.  434  (1868). 


MISCONDUCT.  655 

creed  upon  the  broad  principle  that  the  mutual  conn-  Bk.  IV. 
dence  reposed  by  all  three  partners  in  each  other  when  Chap.  1-  Sect. 

the  partnership  was  formed,  had    not    unreasonably  J. 

ceased;  that  it  was  impossible  that  the  business  could 
be  conducted  as  originally  contemplated;  and  that  al- 
though, being  gentlemen,  no  outbreak  had  occurred  be- 
tween them,  yet  an  attempt  to  compel  them  to  act  as 
partners  for  the  future  would,  as  against  them  .all,  be 
to  compel  them  to  inflict  irreparable  injury  upon  each 
other.  Again  in  Essell  v.  Hayicard  (k),  it  was  held,  ^ssell  v. 
that  where  one  partner  had  become  liable  to  a  criminal 
prosecution  by  reason  of  his  having  been  guilty  of  a 
fraudulent  breach  of  trust,  his  co-partner  had  a  right 
to  have  the  partnership  dissolved;  and  a  notice  to  dis- 
solve having  been  given  by  him  the  partnership  was 
ordered  to  stand  dissolved  as  from  the  date  of  the  no- 
tice, although  the  partnership  was  not  at  will.1 

It  must  be  borne  in  mind  that  the  Court  will  never  Misconduct 
permit  a  partner,  by  misconducting  himself  and  ren-  on  part  of 

dering  it  impossible  for  his  partners  to  act  in  harmonv  ParTner 
.-i-  .  ..  -i  seeKinsr 

with  nim,  to  obtain  a  dissolution  on  the  ground  of  the  dissolution. 

impossibility  so  created  by  himself  (Z). 

In  order  to  facilitate  a  dissolution  in  the  event  of 
misconduct,  a  special  clause  is  usually  inserted  in  part- 
nership articles.  The  effect  of  clauses  of  this  descrip- 
tion has  been  already  adverted  to  (m). 

When    the   Court  dissolves   a    partnership  on    the 
ground  of  *  misconduct  the  dissolution  dates  from  the  [     583  J 
judgment,  unless  there  are  special  grounds  for  order- 
ing a  dissolution  as  from  some  other  date  (n). 

(k)  30  Beav.  158. 

(/)  See  Harrison  v.  Tennant,  21  Beav.  493,  494;  Fairthorne  v. 
Weston,  3  Ha.  387. 

(m)  Ante,  p.  425;  Anderson  v.  Anderson,  25  Beav.  190,  would 
seem  at  first  sight  to  throw  some  doubt  on  the  efficacy  of  such 
clauses,  where  the  misconduct  complained  of  is  not  really  of  any 
importance.  But  the  observations  there  made  must  be  taken 
with  reference  to  the  facts  before  the  Court. 

(w)  Lyon  v.  Tweddle,  17  Ch.  D.  529;  Besch  v.  Frolich,  1 
Ph.  172. 


1  Where  a  partner  signs  checks  without  authority  and  applies 
the  proceeds  to  his  own  use  and  turns  over  firm  property  to 
strangers  at  a  price  far  below  the  market  value,  his  associate  is 
justified  in  dissolving  the  firm.  Reiter  v.  Morton.  90  Pa.  St.  229 
(1880).  A  refusal  by  a  partner  to  give  his  co-partner  any  share 
in  the  rents,  issues  and  profits  of  the  firm's  property  is  a  good 
cause  for  dissolution.     Warner  v.  Leisen,  31  Wis.  109  (1872). 


G5G 


CAUSES  OF  DISSOLUTION. 


Transfer  of 
interest. 


Section  III. — Transfer  of  Interest 

Bk.  IV.  In   addition   to    the   causes    of    dissolution    already 

Chap.  1.  Sect,  mentioned,  there  are  certain  other  events  which,  where 
the  contrary  is  not  expressly  provided  by  agreement 
between  the  partners,  immediately  put  an  end  to  the 
partnership,  or  at  all  events  confer  a  right  to  have  it 
dissolved.  Whether  the  partnership  is  of  definite  or 
indefinite  duration  is  unimportant  (o);  for  the  princi- 
ple upon  which  a  dissolution  results  from  the  events 
in  question,  is,  that  if  no  dissolution  were  to  follow, 
new  partners  would  be  introduced  without  the  consent 
of  all  the  existing  members  of  the  firm  (p).  Any 
event  which  would  produce  this  effect  causes  a  disso- 
lution of  the  whole  firm  (q).  Upon  this  principle  it  is 
that,  in  the  absence  of  an  express  agreement  to  the 
contrary,  a  partnership  is  dissolved  by  taking  a  part- 
ner's share  in  execution  under  a  fi.  fa.  (r),1  by  the 
transfer  of  his  share  by  bankruptcy  (s),2  or  out- 
lawry (t),  and  formerly  in  the  case  of  a  female  part- 
ner, by  her  marriage  (u).3 

The  question  whether  an  assignment  by  a  member  of 
an  ordinary  firm,  of  his  share  in  it,  dissolves  it,  or  gives 
the  other  members  a  right  to  have  it  dissolved,  has  not 
been  much  considered  in  this  country  (x).  Where  the 
partnership  is  at  will,  *  an  assignment  and  notice 
thereof  must,  it  is  conceived,  operate  as  a  dissolution. 
But  where  the  partnership  is  for  a  definite  period, 
which  is  not  expired,  there  is  more  difficulty  in  arriving 

(o)  Crawford  v.  Hamilton,  3  Marl.  251. 

(p)  See  Crawshay  v.  Maule,  1  Swanst.  509. 

(q)  Collyer  on  Part.  72. 

(V)  Ante,  Bk.  III.,  c.  5,  ?4- 

(s)  Fox  v.  Hanbury,  2  Cowp.  448  ;  Ex  parte  Williams,  11  Ves. 
5  ;  Ex  parte  Smith,  5  Ves.  297. 

(t)  As  to  attainder  and  outlawry,  see  ante,  p.  73.  If  a  part- 
ner's share  vests  in  the  Crown  it  is  said  that  the  Crown  by  its 
prerogative  becomes  entitled  to  all  the  partnership  property  ; 
Coll.  on  Part.  72,  sed  qusere. 

{u)  Nerot  v.  Burnand,  4  Russ.  247,  affd.  2  Bli.  N.  S.  215.  See 
now  the  Married  Women's  Property  Act,  1882. 

(x)  In  Heath  v.  Sansom,  4  B.  &  Ad.  175,  the  assignment  was 
by  one  partner  to  his  co-partner  :  and  in  Jefferys  v.  Smith,  3 
Russ.  158,  the  shares  were  transferable  by  the  articles  of  part- 
nership. 

'Sanders  v.  Young,  31  Miss.  Ill,  (1856).  A  sale  under  an  ex- 
ecution levied  on  a  partner's  interest  in  his  firm  dissolves  the 
partnership.  Renton  v.  Chaplain,  9  N.  J.  Eq.  62  (1852);  Carter 
v.  Rowland.  53  Texas  540,  (1880). 

2Wilkins  v.  Davis,  15  Bankr.  Reg.  60  (1876);  Blackwell  v. 
Clavwell,  75  N.   Ca.  213  (1876). 

3  Brown  v.  Chanceller,  61  Texas,  437  (1884). 


Assignment 
of  share. 


[  *  584] 


TRANSFER  OF  INTEREST.  657 

at  a  correct  conclusion.     To  hold  that  the   assignment  Bk.  IV. 
operates  as  a   dissolution,  renders  it    competent  for  a  ^baP-  L  Sect> 

partner  to  do  indirectly  what  he  cannot  do  directly,  J 

viz.,  dissolve  before  the  expiration  of  the  time  for 
which  the  partnership  was  entered  into.  On  the  othe 
hand,  to  hold  that  the  partnership  continues,  is  not  just 
to  the  assignor's  co-partners.  The  assignment  does 
not  of  itself  create  a  partnership  between  them  and  the 
assignee  (y);  but  it  does  deprive  the  assignor  of  all 
his  interest  in  the  concern,  and  his  co-partners  may 
fairly  urge  that  they  never  contemplated  a  partnership 
with  a  person  having  no  interest  in  it.  It  seems  im- 
possible therefore  to  deny  their  right  to  make  the 
assignment  a  ground  for  dissolution.  The  right  of  the 
assignee,  alone  or  with  the  assignor,  to  insist  on  a  dis- 
solution, against  the  will  of  the  assignor's  co-partners 
is  much  more  doubtful,  and  has  not  been  decided.  In 
America  such  right  is  held  to  exist  (z);  but  in  that 
country  it  seems  that  contracts  of  partnership  for  a 
definite  period  are  almost  as  easily  dissolved  as  part- 
nerships at  will,  which  is  certainly  not  the  case  here(a).1 

Whether  an  agreement  by  an  ordinary  partner    to  Creation  of 
hold  his  share  in  the  partnership  in  trust  for  other  per-  trust  of 
sons   entitles  his   co-partner  to  dissolve  the  partner-  share, 
ship  has  never  been  determined.     Considering,  how- 
ever, the  effect  of  notice   to   them  of  the  existence  of 
the  trust,  they  would  probably  be  held  entitled  to  have 
the  partnership  dissolved  in  order  to  be  relieved   from 
their  embarrassment.     The  cestui  que  trust  clearly  does 
not  become  a  partner  with  the  partners  of  his  trus- 
tee  (b). 

(y)  See  Jefferys  r.  Smith.  Russ.  158. 

(z)  Story  on  Part,  g  308  ;  3  Kent.  Com.  59  ;  Marquand  v.  New 
York  Manufac.  Co.,  17  Johns.  525. 

(a)  In  Glvn  v.  Hood,  1  Giff.  328,  and  1  De  G.  F.  &  J.  334  ; 
Pinkett  v.  Wright,  2  Ha.  120  ;  Murray  v.  Pinkett,  12  CI.  &  Fin. 
764  ;  and  Jefferys  v.  Smith,  3  Russ.  156,  some  observations  on 
the  rights  of  an  assignee  of  a  share  will  be  found,  but  they  do 
not  touch  the  question  alluded  to  in  the  text. 

(b)  See  Jefferys  v.   Smith,  3  Russ.  158;  Newry  Rail.  Co.,  v. 

2The  great  majority  of  the  American  authorities  seem  to  hold 
that  the  voluntary  assignment  by  a  partner  of  his  interest  in  a 
firm  formed  to  run  for  a  certain  period  not  yet  expired  has  the 
effect  of  making  the  partnership  dissoluble  at  the  option  either 
of  the  remaining  original  partner  or  of  the  purchaser  of  the  share. 
Cochran  v.  Perry,  8  W.  &  S.  262  (-1844);  Hoi  ton's  Appeal,  13  Pa. 
St.  67  (1850);  Monroe?).  Hamilton,  60  Ala.  226  (1877);  Receivers 
v.  Godwin,  5  X.  J.  Eq.  334  (1846);  A  a  few  cases  hold  it  to 
amount  ipso  facto  to  a  dissolution.  Barkley  v.  Tapp,  87  Ind.  25 
(1882):  Ayer  r.  Aver.  41  Vt.  346  (1868);  Carroll  v.  Evans,  27 
Texas,  622  (186::..  ' 

*  19   LAW   OF   PARTNERSHIP. 


658  CAUSES  OF  DISSOLUTION. 

[  *  585]        *  Section  IV. — The  Occurrence  of  some  Event  which 
Renders  the  Continuance    of  the  Partnership  II- 


Bk.  IV.  Upon  principle,  it  is   apprehended   that   if,  by   any 

Chap.  I.  Sect,  change  in  the  law,  it  becomes  illegal  to  carry  on  a  bi.si- 

^ ness,  every  partnership  formed  before  the  making  the 

Illegality.  law  for  the  purpose  of  carrying  on  that  business,  must 
be  taken  to  have  been  dissolved  by  the  law  in  question. 
So  if,  the  law  remaining  unchanged,  some  event  hap- 
pens which  renders  it  illegal  for  the  members  of  a  firm  to 
continue  to  carry  on  in  business  their  partnership,  such 
"War.  event  dissolves  the  firm.   For  example,if  a  partnership  ex- 

its between  two  persons  residing  and  carrying  on  trade 
in  different  countries,  and  war  between  those  countries 
is  proclaimed,  a  stop  is  thereby  put  to  further  inter- 
course between  the  partners,  and  the  partnership  sub- 
sisting between  them  is  consequently  dissolved  (c). 

Moss,  14  Beav.  64  ;  Bugg's  case,  2  Dr.  &  Sm.  452.  Goddard  v. 
Hodges,  1  Cr.  &  M.  33,  is  the  other  way ;  but  as  to  this,  see 
ante,  p.  28,  note  (p). 

(c)  Story  on  Part.  $  315  et  seq.  and  Grim-wold  v.  "Waddington, 
16  Johns.  438  (Amer.)  there  cited.     See  also,  ante,  pp.  72,  92. 


CONSEQUENCES  OF  DISSOLUTION.  659 


*  CHAPTER  II.  [  *  586] 

CONSEQUENCES  OF  DISSOLUTION. 

In  order  to  wind  up  the  affairs  of  a  dissolved  part-  gt  Ty 
nership,  it  is  necessary  first  to  pay  its  debts;  secondly,  Chap.  2. 

to  settle  all  questions  of  account  between  the  partner's;  ~ — : 

and,  thirdly,  to  divide  the  unexhausted  assets  (if  any)  J'"]1^^ 
between  the  partners  in  proper  proportions;  or,  if  the  ships, 
assets  are  insufficient  for  these  purposes,  then  to  make 
up  the  deficiency  by  a  proper  contribution  between 
the  partners.  This  can  be  done  by  the  partners  them- 
selves, or  their  representatives  (d);  but  if  disputes 
arise  then  recourse  must  almost  always  be  had  to  the 
Chancery  Division  of  the  High  Court,  for  it  is  under 
its  superintendence  only  that  the  assets  of  a  partner- 
ship can  be  properly  sold  and  applied,  that  the  part- 
nership accounts  can  be  satisfactorily  taken,  and  that 
contribution  can  be  enforced  (e). 

The  consequences   of    a  dissolution  of  partnership,  Cor.se- 
both  as  regards  creditors  and  as  regards  the  partners  quences  of 
themselves,  have  been  pointed  out  in  earlier  parts  of  dissolution, 
the  treatise,  and  only  require  to  be  shortly  recapitu- 
lated. 

I.   As  regards  the  creditors  of  the  firm,  it  has  been  i.  As  regards 
seen  creditors. 

1.  That  a  dissolution  of  partnership,  whether  general 
or  partial,  does  no*  discharge  any  of  the  partners  from 
liabilities  incurred  by  them  previously  to  the  time  of 
dissolution  (/). 

2.  That  in  order  that  a  member  of  a  firm,  wholly  or 
partially  dissolved,  may  be  freed  from  his  liability  to  a 
person  who  was  a  creditor  of  the  firm  at  the  time  of 
its  dissolution,  such  creditor  must  either  have  been 
paid,  or  satisfied,  or  must  have  accepted  some  fresh  ob- 
ligation in  lieu  of  that  which  existed  when  the  firm  was 
dissolved  (g). 

id)  See  Lyon  v.  Haynes,  5  Man.  &  Gr.  505,  where  a  banking 
company  governed  by  7  Geo.  4,  c.  46.  had  been  voluntarily  dis- 
solved. 

(e)  See  Bk.  III.,  c.  10,  \  6. 

(/)  Ante,  p.  223  et  sea. 

(g)  Ibid. 


6.60  CONSEQUENCES  OF  DISSOLUTION. 

j  *5S7]  *  3.   That  (except  in  a  few  special  cases)  (h)  notice  of 

Bk.  IV.  dissolution  or  retirement  is  requisite  to  determine  the 

Chap.  2.  responsibility  of  each  partner  in  respect  of  such  future 

acts  of  his  late  co-partners,  as  would  be  imputable  to 

the  firm  if  no  change  in  it  had  taken  place  (i). 

4.  That  notice  of  dissolution  generally,  as  by  adver- 
tisement, is  not  sufficient  to  affect  an  old  customer,  un- 
less it  can  be  brought  to  his  knowledge  (k). 

5.  That  notice  of  dissolution,  is  notice  that  the  former 
partners  are  no  longer  each  other's  agents  as  before  (I). 

6.  That  after  dissolution  and  notice,  partners  cease 
to  be  responsible  for  the  future  acts  of  each  other  (m), 
unless  they  continue  to  hold  themselves  out  as  partners, 
in  which  case  the  notice  is  of  no  avail  (n). 

2.  As  regards       II.   As  regards  the  partners  themselves.     Upon   the 
the  partners,   dissolution  of  a  partnership,  and  in  the  absence  of  any 
agreement  to  the  contrary,  it  has  been  seen — 

1.  That  each  partner  has  a  right  to  have  the  partner- 
ship assets  8pplied  in  liquidation  of  the  partnership 
debts,  and  to  have  the  surplus  assets  divided  (o). 

2.  That  the  right  of  each  partner  is  to  insist  on  a 
sale  of 'the  partnership  assets;  there  being  in  the  ab- 
sence of  special  circumstances,  no  right  in  any  partner 
to  have  the  value  of  his  own  or  of  any  co-partner's  share 
determined  by  valuation,  or  to  have  the  partnership 
property,  or  any  portion  of  it,  divided  in  specie' (p). 

3.  That  each  partner  has  a  right  to  insist  that  noth- 
ing further  shall  be  done,  save  with  a  view  to  wind  up 
the  concern  (q). 

4.  That,  for  the  purposes  of  winding  up,  the  partner- 
ship is  deemed  to  continue  (r);  the  good  faith  and 
honorable  conduct  due  from  every  partner  to  his  co- 
partners   during    the  continuance  of  the  partnership, 

[  *  588]  being  equally  due  so  long  as  its  affairs  *  remain  un- 
settled (s);  and  that  which  was  partnership  property 
before,  continuing  to  be  so  for  the  purpose  of  dissolu- 
tion, as  the  rights  of  the  partners  require  (t).  . 

(/<)  Ante,  p.  210  et  seq. 
(i)  Ibid. 
(A)  Ante,  p.  221. 
(/)  Ante,  pp.  210,  213. 
(«i)  Ibid, 
(n)  Ante,  p.  216. 
(o)  Ex  parte  Ruffin,  6  Ves.  127. 
(p)  Ante,  p.  555. 

(q)  Wilson  v.  Greenwood,  1  Swanst.  481  ;  Crawshav  v.  Maule, 
ib.  507  ;  Ex  parte  Williams,  11  Ves.  3. 
(»•)  See  ante,  p.  217. 
(a)  Ante,  p.  303. 
(t)  See  Ex  parte  Williams,  11  Ves.  Sand  6  ;  Crawshay  v.  Collins, 


WINDING-UP  OF  PARTNERSHIPS.  661 

5.  That  the  right  on  a  dissolution  to  wind  np  the  Bk.  IT. 
partnership  affairs,  i.  e.,  to  get  in  its  credits,  convert  ^naP-  ~- 
its   assets  into   money,  pay  its   debts,  and  divide  the 
residue,  belongs  as  much  to  one  of  the  late  partners  as 

to  another  ;  and  if  they  cannot  agree  amongst  them- 
selves, recourse  must  be  had  to  the  Court,  which  will, 
if  necessary,  appoint  a  receiver,  direct  a  sale  of  the 
assets  and  payment  of  the  partnership  debts,  and  re- 
strain a  partner  from  interfering  with  the  proper  wind- 
ing up  of  the  partnership  (u). 

6.  That  the  right  to  wind  up  the  affairs  of  a  dissolved 
partnership  is,  however,  personal  to  the  members  of  the 
late  firm ;  and  that,  therefore,  on  the  death  or  bank- 
ruptcy of  one  of  them,  his  executors  or  trustees  will  not 
be  permitted  to  take  the  management  of  the  affairs  of  the 
partnership  out  of  the  hands  of  the  other  partners  (x). 

7.  That  if  the  partnership  assets  are  insufficient  to 
pay  the  partnership  debts,  the  deficiency  must  be  made 
good  by  the  partners  in  proportion  to  their  respective 
shares  (y). 

8.  That  after  a  partnership  has  been  dissolved,  any 
one  of  the  late  partners  has  a  right  to  have  that  disso- 
lution duly  notified,  so  that  a  stop  may  be  put  to  the 
power  of  his  co-partners  to  bind  him  (z).  It  seems 
that  he  has  also  a  right  to  restrain  them  from  carrying 
on  business  under  the  old  name,  if  such  name  is  or  in- 
cludes his  own,  and  if  he  has  not  assigned  his  interest 
in  the  good  will  to  them  ;  for  although  their  continued 
use  of  the  old  name,  even  with  his  knowledge,  is  not  of 
itself  sufficient  to  render  him  liable,  by  virtue  of  the 
doctrine  of  holding  out  (a),  such  use  undoubtedly  ex- 
poses him  to  the  *  risk  of  having  actions  brought  [  *  589] 
against  him  as  if  he  still  belonged  to  the  firm,  and  in 

the  case  supposed  his  co-partners  have  no  right  to  ex- 
pose him  to  that  risk  (b). 

9.  That  each  partner  has  a  right  to  commence  a  new 
business  in  the  old  line,  and  in  the  old  neighbourhood; 
either  alone,  or  in  partnership  with  other  people  (c). 

2  Russ.  34-2,  343  ;  Nerot  v.  Burnand,  4  Russ.  247  ;  Payne  v. 
Hornby,  25  Beav.  280.  See,  too,  Ex  parte  Trueman.  1  D.  &  Ch. 
464,  as  to  partnership  books. 

(u)  See  ante,  Bk.  III.  ch.  10,  \  6. 

(x)  Allen  v.  Kilbre,  4  Madd.  464  ;  Ex  parte  Finch,  1  D.  &  Ch. 
274  ;  Fraser  v.  Kershaw.  2  K.  &  J.  496. 

(y)  See  ante,  p.  401. 

(z)  Hendry  v.  Turner,  32  Ch.  D.  355  ;  Troughton  v.  Hunter, 
18  Beav.  470. 

(a)  Newsome  v.  Coles,  2  Camp.  617. 

(b)  See  ante,  p.  544. 

(c)  See,  as  to  this,   ante,  pp.  436,  437. 


662  CONSEQUENCES  OF  DISSOLUTION. 

Bk.  IV.  Such,  in  general  terms,  are  the  consequences  of  dis- 

Chap.  2.  solution.      In  order,  however,  to  obtain  a  complete  view- 

Matters  in-     of  these  consequences,  it  is  necessary  to  attend  to  the 
volved  in  the  principles  upon  which  premiums  are  apportioned,  and 
winding  up    partnership  accounts  are  taken ;  to  the  distinction  be- 
<rta  partner-  tween  tlie  joint  e8tate  of  the  firm,  and  the  separate  es- 
tates of  the  partners  composing  it;  to  the  doctrines  of 
contribution  and  indemnity;  to  the  rules  which  relate 
to  appointing  a  receiver  and  granting  an  injunction; 
and  lastly,  to  the  special  agreements,  if  any,  into  which 
the  partners  may  have  entered.     All  these  matters  were 
discussed  in  the  third  book,  and  it  is  not  necessary  fur- 
ther to  allude  to  them.     But  the  complicated  questions 
which  arise  in  the  event  of  a  dissolution  by  death  or 
bankruptcy,  have  necessarily  been  reserved  for  sepa- 
rate examination,  and  they  will  form  the  subject  of  the 
next  two  chapters  of  the  present  book. 


DEATH  AND  ITS  CONSEQUENCES.  663 


*  CHAPTER  III.  [  *  590] 

OF  DEATH  AND  ITS  CONSEQUENCES. 

The  consequences  of  the  death  of  a  member  of  a  Bk.  IV. 
partnership  will  be  most  conveniently  pointed  out  in  ChaP-  3- Sect- 

the  course  of  an  examination  of  the  position  of  the  sur-  J 

viving  members,  and  of  the  executors  of  the  deceased 
member — 

1.  As  between  themselves; 

2.  As  regards  the  creditors  of  the  firm;  and 

3.  As  regards  the  separate  creditors  and  legatees  of 
the  deceased. 


Section  I. — Consequences  as  Regards  the   Surviving 
Partners  and  the  Executors  of  the  Deceased. 

The  death  of  any  one  member  of  a  firm  operates  as  Death  of  a 
a  dissolution  thereof  as  between  all  the  members,  un-  partner  dis- 
less  there  is  some  agreement  to  the  contrary  (a).1  This  solves  the 
is  obviously  reasonable,  for  by  the  death  of  one  of  the  firm- 
members  it  is  no  longer  possible  to  adhere  to  the  origi- 
nal contract,  the  essence  of  which  is  (in  the  case  sup- 
posed), that  all  the  parties  to  it  shall  be  alive.     The 
mere  fact  that  the  partnership  was  entered  into  for  a 
definite  term  of  years,  which  was  unexpired  when  the 
death  occurred,  is  not  sufficient  to  prevent  a  dissolution 
by  such  death  (6). 

Unless  all  the  partners  have  agreed  to  the  contrary,  Executors  of 
when  one  of  them  dies,  his  executors  have  no  right  to  deceased  do 
become  *  partners   with   the  surviving  partners   (c);2[*591] 
nor  to  interfere  with  the  partnership  business;  but  the  °f^^me 

(a)  See  Pearce  v.  Chamberlain,  2  Ves.  sen.  33;  Crawford  v. 
Hamilton,  4  Madd.  251;  Crawshay  v.  Maule.  1  Swanst.  509; 
Vulliamy  v.  Noble.  3  Mer.  614;  Crosbie  v.  Guion,  23  Beav.  518. 

(b)  Crawford  v.  Hamilton,  3  Madd.  251. 

(c)  Pearce  v.  Chamberlain,  2  Ves.  S.  33. 

1  Smith's  Estate,  11  Phila.  131  (1876);  Vilas  v.  Far  well,  9 
Wis.  460  (1859);  Burwell  v.  Cawopd,  2  How.  560  (1844);  Good- 
burn  v.  Stevens,  5  Gill.  1  (1847);  Roberts  v.  Kelsey,  38  Mich. 
■602  (1878). 

2  See  p.  590,  note  1. 


partners. 


6Q± 


DEATH  AND  ITS  CONSEQUENCES  AS  BETWEEN 


Bk.  IV. 
Chap.  3.  Sect. 
1. 


Jus  accres- 
cendi,  &c. 

Position  of 

surviving 

partners. 


Actions  by- 
partners 
against  the 
executors  of 
a  deceased 
partner. 


executors  of  the  deceased  represent  him  for  all  pur- 
poses of  account,  and,  unless  restrained  by  special 
agreement,  they  have  the  power,  by  bringing  an  action, 
to  have  the  affairs  of  the  partnership  wound  up  in  a 
manner  which  is  generally  ruinous  to  the  other  part- 
ners.1 

The  maxim  jus  accrescendi  inter  mercatores  locum  non 
habet,  has  been  already  examined,  and  need  not  be  again 
noticed  (d). 

On  the  death  of  a  partner  the  surviving  members  of 
the  firin  are  the  proper  persons  to  get  in  and  pay  its 
debts  (e).2  Bat  the  debts  they  get  in  must  be  placed 
to  the  debit  of  the  late  firm,  and  the  debts  they  pay  must 
be  placed  to  its  credit.  Whilst,  therefore,  the  executors  of 
the  deceased  partner  are  entitled  to  treat  payments  made 
to  the  survivors  by  a  debtor  to  the  old  firm,  as  made  in 
respect  of  his  debt  to  it  (/),  the  survivors  have  aright, 
if  they  pay  more  than  their  share  of  the  debts  of  the 
old  firm,  to  be  reimbursed  out  of  the  estate  of  their  de- 
ceased co-partner  (g).  They  are  creditors  against  that 
estate  for  what  may  be  due  to  them,  from  their  deceased 
partner,  on  taking  the  partnership  accounts,  and  they 
may  as  creditors  bring  an  action  for  the  administration 
of  his  estate  (h).  If  he  has  no  legal  personal  repre- 
sentative, the  Probate  Division  of  the  High  Court  will 
grant  a  limited  administration  to  a  nominee  of  the  sur- 
viving partners,  so  as  to  enable  them  to  institute  pro- 
ceedings to  have  the  partnership  accounts  properly 
taken  (i). 

A  surviving  partner,  if  a  creditor  of  the  deceased, 
may  sue  either  in  that  character  for  a  common  admin- 
istration judgment,  or,  in  the  character  of  a  partner, 
for  a  judgment  for  a  partnership  account,  and  for  pay- 

00  Ante,  p.  340. 

(e)  Ante,  p.  288. 

(f )  Lees  v.  Laforest,  14  Beav.  250. 

(g)  Musson  v.  May,  3  V.  &  B.  194. 

(h)  See  l\obinson  v.  Alexander,  2  CI.  &  Fin.  717;  Addis  v. 
Knight,  2  Mer.  119.  If  the  deceased  has  pledged  his  real  estate 
to  his  co-partners  for  a  debt  due  from  him  to  them,  they  cannot 
enforce  their  security  in  the  absence  of  his  legal  personal  repre- 
sentative, Scholefield  v.  Heafield,  7  Sim.  667. 

(i)  Cawthorn  v.  Chalie,  2  Sim.  &  Stu.  127.  The  Court  of 
Chancery  would  not  in  such  a  case  appoint  a  person  to  represent 
the  estate  of  the  deceased.     Rowlands  v.  Evans.  33  Beav.  202. 


1  McKean  r.  Vick,  108  111.  373  (1884);  Hoyt  v,  Sprague,    103 
U.  S.  613  (1880). 

2  Teigley  v.  Whitaker,  22  Oh.  St.  606  (1872);  Tillotson  r.  Til- 
lotson,  "34  Conn.    335  (1867);    Merritt  v.   Dickey,   38   Mich.  41 

(1878). 


THE  DECEASED  AND  THE  SURVIVING  PARTNERS.  665 

ment  of  what  is  due  on  that  account;  *  and   if  assets  [  *  592] 
are  not  admitted,  then  for  a  judgment  for  the  adminis-  Bk.  IV. 
tration  of  the  estate  of  the  deceased.     An  action  in  the  cliaP-  3-  Sect- 
alternative  may,  it  is  conceived,  now  be  sustained  (j  ).  J 

The  legal  personal  representative  of  the  deceased  must 
be  a  party  if  an  account  of  his  estate  is  sought.  If 
there  is  no  such  representative,  but  the  assets  of  the 
deceased  or  of  the  partnership  are  in  danger,  and  the 
object  of  the  plaintiff  is  to  have  them  protected,  he 
should  confine  his  claim  for  relief  accordingly,  and  not 
seek  for  an  account  (k). 

In  the  absence  of  an  express  agreement  to  that  effect,  Xo  right  to 
the  surviving  partners  have  no  right  to  take  the  share  take  the 
of  the  deceased  partner  at  a  valuation;  nor  to  have  it  sliare  of 
ascertained  in  any  other  manner  than  by  a  conversion  f  ^f^fti  Ht 
of  the  partnership  assets  into  money  by  a  sale  (Z);  nor 
have    they    any  right  of    preemption    (m).     Even   the 
good- will  of  the  business,  if  saleable,  must  be  sold  for 
the  benefit  of  the  estate  of  the  deceased;  although  the 
surviving  partners   are  under  no  obligation  to  retire 
from  business  themselves,  and  cannot,  it  seems,  be  pre- 
vented from  recommencing   business   together    in  the 
name  of  the  old  firm   unless  the  good-will  has  been 
sold  (n). 

In  ascertaining  the  share  of  the  deceased,  the  sur-  Accounting 
viving  partners  must  not  only  bring  into  account  the  for  subse-  ° 
assets  of  the  firm  which  actually  existed  at  the  time  of  quent  pro- 
his  death,  but  also,  whatever  has  been  obtained  by  the  fats' 
employment  of  those  assets  up  to  the  time  of  the  clos- 
ing of  the  account ;  for  so  long  as  profits  are  made  by 
the  employment  of  the  capital  of  the  deceased  partner, 
so  long  must  such  profits  be  accounted  for  by  the  sur- 
viving partners  (o).     The   executors  of  the  deceased 
have,  however,  the  option  of  taking  interest  at  5Z.  per 
cent.  (p). 

On  the  other  hand,  the  surviving  partners  are  enti-  Allowance 
tied,  if  they  cany  on  the  business  for  the  benefit  of  the  for  carrying 
estate  of  the  *  deceased  partner,  to  an  allowance  for  so  ?\k"?*Fes& 


[  *  593  J 


(j)  Orel.  xvi.  r.  7. 

(k)  Rawlins  i:  Lambert,  1  J.  &  H.  458.  Under  the  new  prac- 
tice a  claim  for  an  account  would  probably  be  harmless. 

(I)  Crawshay  v.  Collins,  15  Ves.  226,  229;  Featherstonhaugh 
v.  Fenwick,  17  Ves.  308.  See,  as  to  unsaleable  assets  and  pend- 
ing contracts,  ante,  p.  558.  And  as  to  the  discretion  of  the  Court, 
ante,  p.  556. 

(m)  Brown  v.  Gellatly,  31  Beav.  243. 

(n)  See  ante,  p.  436  et  seq. 

(o)  See  aide,  p.  521  et  seq. 

(p)  Ante,  p.  528. 


me 


DEATH  AND  ITS  CONSEQUENCES  AS  BETWEEN 


Bk.  IV. 
Chap.  3. 
Sect.  1. 


doing;  unless  they  are  also  his  executors,  in  which  case 
they  can  make  no  charge  for  their  trouble  (q). 

The  right  of  the  executors  as  against  the  surviving 
Position  of     partners  is,  simply,  to  have  the  share  of  the   deceased 
the  executors  ascertained  and  paid  ;  but  this  frequently  cannot  be  done 
*d  th&-  d         without  a  general  sale  and  winding  up  of  the  partner- 
ship. 

A  bond  fide  sale,  however,  by  the  executors  to  the 
surviving  partners,  can  generally  be  made  with  safety 
if  no  surviving  partner  is  an  executor  (r).1  Where, 
however,  a  sale  of  the  share  of  the  deceased  cannot  be 
effected  by  private  arrangement,  the  executors  must  en- 
force a  general  sale  and  winding  up  for  their  own  safety, 
unless  the  persons  interested  in  the  estate  of  the  de- 
ceased assent  to  the  adoption  of  some  other  course. 
And  even  if  they  do,  it  must  not  be  forgotten  that  the 
executors  may  not  be  able,  without  risk  to  themselves, 
to  continue  the  share  of  the  deceased  in  the  business, 
and  take  the  profits  accruing  in  respect  of  it ;  for  by 
sharing  profits  made  after  the  death  of  the  deceased, 
the  executors,  although  they  are  only  trustees  for 
others,  may  become  liable  as  partners  with  the  surviv- 
ing partners  ;  and  may  therefore  become  liable  to  be 
adjudicated  bankrupt  and  to  be  compelled  personally 
to  pay  debts  contracted  in  carrying  on  the  business  (s).2 
The  position  of  the  executors  of  a  deceased  partner  is, 
in  fact,  often  one  of  considerable  hardship  and  diffi- 
culty ;  if  they  insist  on  an  immediate  winding  up  of 
the  firm,  they  may  ruin  those  whom  the  deceased  may 
have  been  most  anxious  to  benefit ;  whilst  if  for  their 
advantage  the  partnership  is  allowed  to  go  on,  the  ex- 
ecutors may  run  the  risk  of  being  ruined  themselves. 
Effect  of         With  a  view  to  obviate  this,  it  is  not  unusual  for  one 


{      (q)  Ibid. 

(r)  See  infra,  \  3.  Coburn  v.  Collins,  35  Ch.  D.  373,  shows 
that  the  Bills  of  Sale  Acts  must  not  he  overlooked  in  transactions 
of  this  kind. 

(s)  Formerly  they  always  did  incur  this  liability.  See  Ex  parte 
Holdsworth,  i  M,  D.  &  D.  475  ;  Wightman  v.  Town  roe,  1  M.  & 
S.  412  ;  Ex  parte  Garland,  10  Ves.  119.  But  see  now  Holme  v. 
Hammond,  L.  R.  7  Ex.  218,  noticed  ante,  p.  32. 

1  Grim's  Appeal,  105  Pa.  St.  375  (1884);  Ludlum  v.  Bucking- 
ham, 35  N.  J.  Eq.  71  (1882);  Sage  v.  Woodin,  66  N.  Y.  578  (1876). 

2  Wild  v.  Davenport,  48  N.  J.  L.  129  (1886);  but  if  he  merely 
leaves  the  assets  of  the  estate  in  the  business  without  engaging 
personally  and  actively  in  the  management  of  the  enterprise,  he 
is  not  responsible  to  creditors  by  reason  of  his  connection  with 
the  firm.  Phillips  v.  Blatchford,  137  Mass.  510  (1884);  Owens 
v.  Mackall,  33  Md.  382  (1870):  Wild  v.  Davenport,  48  N.  J.  L. 
129  (1886). 


THE  DECEASED  AND  THE  SURVIVING  PARTNERS.  667 

partner  to  make  bis  co-partner  his  executor ;  but  tbe  Bk.  IV. 
difficulty  of  tbe  executor's  position  is   tbus  ratber  in-  CnaP- 3-  Sect. 

creased  tban  diminished  ;  for  bis  own  personal  interest  J 

as  a  surviving  partner  is  brought  *  into  direct   conflict  [  *  594] 
with  his  duty  as  an  executor.       Everything  therefore  making  a  co- 
whicb  be  does  is  liable  to  question  and  misconstruction  partner  an 
on  the  part  of  the  persons  beneficially   entitled   to  the  executor- 
estate  of  the  deceased  ;    and  he   is   practically    much 
more  fettered  in  the  discharge  of  his  duties,  and  in  the 
exercise  of  his  rights,  than  if  he  had  not  to  act  in  the 
double  character  imposed  upon  him  (t).     This  will  ap- 
pear in  tbe  section  in  which  it  is  proposed  to  examine 
the  rights  of  the  separate  creditors  and  legatees  of  the 
deceased  against  his  executors  and  his  surviving  part- 
ners. 

Where  a  deceased  partners   estate  is   administered  Actions  for 
under  the  order  of  the  Court,  his  executors,  if  they  act  mdeninify- 
properly,  are  personally  protected  from  all  consequen- !ng,execu" 
ces,  and  no  action  can  be  sustained  against  them  in  re- 
spect of  what  they  so  do  (a).     If  there  are  liabilities 
which  will  have  to  be  met,  the  Court  will  order  part  of 
tbe  assets  to   be    set  aside  to  meet  them  when  they 
arise  (x).     But  if  the  liabilities  are  remote  and  contin- 
gent, and  may  possibly  never  arise  at  all,  tbe  utmost 
that  the  executors  can  obtain  in  the  shape  of    indem- 
nity, in  addition  to  that  afforded  by  the  orders  of  the 
Court  itself,  is  a  covenant  from  the  testator's  legatees 
or  next  of  kin  (y). 

No  succession  duty  is  payable  by  surviving  partners  Succession 
on  the  death  of  a  member  of  tbe  firm,  even  although  duty, 
they  may  benefit  thereby  (z). 


Section  II. — Consequences  as  Regakds  Joint  Creditors. 
1.   With  reference  to  what  occurred  before  death. 

The  position  of  tbe  executors  of  a  deceased  partner,  Position  of 

with  reference  to   the   creditors   of  the  firm,  has,  to  a  executors  of 
'         ' deceased 

{t)  See  some  general  remarks  on  this  subject  in  Huttonu.  Eos-  partner  as 
siter,  7  De.  G.  M.  &  G.  12.  regards 

(u)  Waller  v.  Barrett,  24  Beav.  413.  creditors  of 

(x)  Fletcher  v.  Stevenson,  3  Ha.  360  ;    Brewer   v.  Pocock,  23  the  firm. 
Beav.  310. 

(y)  See  Dean  v.  Allen,  20  Beav.  1  ;  Waller  v.  Barrett,  24  ib. 
413  ;  Addams  v.  Ferick,  26  Beav.  384  ;  Bennet  v.  Lytton,  2  J.  & 
H.  155. 

(z)  Oldfield  v.  Preston,  3  De  G.  F.  &  J.  398.  Compare  Cross- 
man  v.  Tbe  Queen,  18  Q.  B.  D.  256. 


668 


DEATH  AND  ITS  CONSEQUENCES 


[*595] 


Bk.  IV.  considerable  extent,  been  already  ascertained.      For  it 

Chap.  3.  Sect.  ^a9  i-,een  seen  : — 

*  1.  That,  notwithstanding  the  death  of  a  partner,  his 
estate  is  liable  to  the  creditors  of  the  firm.  ;  and  not 
only  in  respect  of  debts  contracted  in  his  lifetime,  in 
the  ordinary  way  of  business,  but  also  in  respect  of 
debts  arising  from  breaches  of  trust  committed  in  his 
lifetime  by  himself,  or  his  co-partners,  and  imputable 
to  the  firm  (a); 

2.  That  this  liability  cannot  be  got  rid  of  by  any  ar- 
rangement between  the  executors  of  the  deceased  and 
the  surviving  partners  ;  and  that  notwithstanding  sub- 
sequent dealings  between  the  creditors  and  the  surviv- 
ing partners,  the  liability  of  the  executors  continues, 
until  it  can  be  shown  that  the  creditors  have  abandoned 
their  right  to  obtain  payment  from  the  estate  of  the 
deceased,  or  that  their  demands  have,  in  fact,  been  paid 
or  discharged  (6). 

3.  That  this  liability  does  not  extend  to  ordinary 
torts,  for  as  to  them  actio  pey^sonalis  moritur  cum  per- 
sona (c), 

These  propositions  have  been  already  so  fully  illus- 
trated in  various  portions  of  the  present  treatise,  that 
it  is  unnecessary  here  to  do  more  than  collect  the  cases 
establishing  them. 


Summary  ot 

cases. 


Estate  of  1.    Cases  in  which  by  death  alone  a  partner's  liability 

deceased  )ias  been  extinguished  :  — 

discharged. 

Sumner  v.  Powell,  2  Mer.  30,  and  Turn.  &  R.  423   {ante,   p. 
196). 

Clarke  v.  Bickers,  14  Sim.  639  {ante,  p.  196). 

Wilmer  v.  Currey,  2  De  G.  &  Sm.  347  (ante,  p.  197). 

Hill's  case,  20  Ey.  585.     Joint  holders  of  shares. 

Estate  of  2.    Cases  in  which   the   estate  of  a  deceased  partner 

deceased  not  has  been  held  liable  (d)  ; — 

discharged. 

id)  Ante,  p.  194  ct  seq, 

(b)  Ante,  p.  239  ct  seq. 

(c)  Ante,  p.  198  el  seq.  The  Act  3  &  4  Wm.  4,  c.  42,  \  2,  gives 
a  remedy  against  the  executors  of  a  person  who  commits  a  tort 
within  six  months  of  his  death,  provided  such  tort  effects  the 
real  or  personal  property  of  the  person  injured.  See  Phillips  v. 
Homfray,  11  App.  Ca.  466,  and  24  Ch.  D.  439.  As  to  frauds,  see 
New  Sombrero  Phosphate  Co.  v.  Erlanger,  3  App.  Ca,  1218,  and 
5  Ch.  D.  73  ;  Peek  v.  Gurney,  L.  R.  6  Ho.  Lo.  377,  and  13  Eq. 
79  ;  Davidson  v.  Tulloch,  3  McQu.  783  ;  Twycross  v.  Grant,  4  C. 
P.  D.  40  ;  and  as  to  slander  ol  title  to  trade  marks,  Hatchard  v. 
Mege,  18  Q.  B.  D.  771. 

(d)  See  the  celebrated  judgment  in  Devaynes  v.  Noble,  1  Mer. 
539,  and  2  R.  &  M.  495.  ' 


AS  REGARDS  JOINT  CREDITORS.  669 

*  Liability  in  respect  of  contracts.  [  *  596] 

Beresford  v.  Browning,  20  Eq.  564  {ante,  p.  194).  Bk.  IV. 

Lane  v.  Williams,  2  Vern.  292.  Chap.  3.  Sect. 

o 
Simpson  v.   Vaughan,  2  Atk.  31.  _^ 


Darivent  v.   PFaZfore,  ib.  510. 

Clavering  v.    Wcstley,  3  P.  W.  402. 

£/s/<op  v.  Church,  2  Ves.  S.  100  and  371  (arete,  p.  194). 

Jacomb  v.  Harwood,  ib.  265. 

i?Mrre  v.  i?«r»,  3  Ves.  573  (arete,  p.  195). 

Thomas  v.  Frazer,  3  Ves.  399.  . 

Or/-  v.  CTase,  1   Mer.  729. 

flarris  v.  Farwell,  13  Beav.  403. 

Devaynes  v.  Voo/e,  1  Mer.  539,  and  2  E.  &  M.  495. 

Wilkinson  v.  Henderson,  1  M.  &  K.  583. 

Two/ye  v.  Jackson,  2  Y.  &  C.  Ex.  553. 

fltBs  v.  J/eifae,  9  Ha.  297. 

£Ve«  v.  Beckwith,  3  Jur.  N.  S.  31  M.  R.  (pas<,  p.  600). 

Cheetham  v.  CVooA:.  McCl.  &  Y.  307. 

Liability  in  respect  to  frauds  and  breaches   of  trust. 

New  Sombrero  Phosphate  v.  Erlanger,  5  Ch.  D.  73,  and  3  App. 

Ca.  1218. 
Blair  v.  Bromley,  2  Ph.  354  (ante,  p.  153). 
Server  v.  Zee,  6  Beav.  324  (arete,  p.  153). 
Vulliamy  v.  iVoWe,  3  Mer.  619. 
Devayney  v.  Noble. 

Clayton's  case,  1  Mer.  576  (arete,  pp.  152,  236). 

Baring's  case,  ib.  612  (arete,  p.  152). 

JF«rtfVs  case,  ib.  624. 

3.  Cases  in  which  the  estate   of  a  deceased  partner  Estate  of 
has  been  held  liable,  notwithstanding  dealings   between  deceased  not 
the  creditors  of  the  firm  and  the  surviving  partners : —  discharged 

a  *  by  what  has 

Devaynes  v.  Noble.  occurred 

Sleech's  case,  1  Mer.  539.  s"lc;t  Ms 

'  death. 

Clayton's  case,  ib.  579  {ante,  pp.  152,  236). 

Palmer's  case,  ib.  623. 
Braithwaitc  v.  Britain,  1  Keen,  206. 

Wmter  v.  Trerees,  4  M.  &  Cr.  101  (a  very  important  case). 
Harris  v.  Farwell,  15  Beav.  31  (ante,  p.  251). 
Daniel  v.  Cross,  3  Ves.  277. 

Jacomb  v.  Harwood,  2  Ves.  S.  265.  Estate  of 

ite  Hodgson,  31  Ch.  D.  177.  deceased 

discharged 

4.  Cases  m  which  the  estate  of  a  deceased  partner  l,v  wll;,t  nas 
has  been  held  discharged  by  what  has  taken  place   be   ^L1^ 
ftoeen  the  creditor  and  the  surviving  partners  : —  death. 


670 


DEATH  AND  ITS  CONSEQUENCES 


\  *  597] 
Bk.  IV. 
Chap.  3.  Sect. 
o 


Statute  of 
Limitations. 


Right  of 

creditor  of 
firm  to  be 
paid  ont  of 
the  estate  of 
a  deceased 
partner. 


*  By  general  dealings. 
Oakley  v.  Pasheller,  10  Bli.  548,  and  4  CI.  and  Fin.  207  (ante, 

p251). 

Brown  v.  Gordon,  16  Beav.  302  (ante,  p.  252). 
Wilson  v.  Lloyd,  16  Eq.  60,  which  cannot,  however,  be  re- 
lied on  (see  ante,  pp.  239,  251). 

By  payment. 

Deraynes  v.  Noble. 

Clayton's  case,  1  Mer.  572  (ante,  p.  228). 

Merrimanv.  Ward,  1  J.  &  H.  371.  This  case  is  important 
as  showing  that  where  a  debt  of  a  deceased  partner  has 
been  discharged  by  the  application  of  the  rule  in  Clayton 's 
case,  it  is  not  competent  for  his  executors  to  revive  such 
a  debt  against  his  estate. 

The  estate  of  a  deceased  partner  may  be  discharged 
by  the  statute  of  limitations  ;  and  now,  by  the  Mercan- 
tile law  amendment  act  payments  by  the  surviving 
partners  will  not  keep  alive  the  creditor's  claim  against 
the  executors  of  the  deceased  (e).  The  effect  in  equity 
of  such  payments  before  the  passing  of  the  act  in  ques- 
tion was  by  no  means  clearly  settled  (/) ;'  but  whatever 
doubt  there  may  formerly  have  been  upon  the  subject, 
it  has  been  long  settled  that  a  creditor  of  the  firm  can 
proceed  against  the  estate  of  a  deceased  partner,  with- 
out first  having  recourse  to  the  surviving  partners,  and 
without  reference  to  the  state  of  the  accounts  between 
them  and  the  deceased  (g)-2  But  it  is  necessary  to 
make  the  surviving  partners  parties  to  the  action,  for 
they  are  interested  in  the  issues  raised  between  him 
and  the  executors  (h).3 

(e)  19  &  20  Vict.  c.  97,  \  14.  See  Thompson  v.  Waithman,  3 
Drew.  628,  which,  although  wrong  as  regards  the  retrospective 
operation  of  the  act  (Jackson  v.  Wooley,  8  E.  &  B.  778),  is  in 
other  respects  correct,  ante,  p.  263. 

(/)  Compare  Winter  v.  Innes.  4  M.  &  Cr.  101,  and  Braithwaite 
v.  Britain,  1  Keen,  206,  with  Way  v.  Bassett,  5  Ha.  55,  and 
Brown  v.  Gordon,  16  Beav.  302.     See,  also,  ante,  pp.   261,  262. 

(g)  Ee  Hodson,  31  Ch.  D.  177  ;  Be  McEae,  25  ib.  16  ;  Wilkin- 
son v.  Henderson,  1  M.  &  K.  582  ;  Devaynes  v.  Noble,  2  R.  &  M. 
495  ;  Thorpe  r.  Jackson,  2  Y.  &  C.  Ex.  553.     See  ante,  p.  195. 

(h)  See,  in  addition  to  the  cases  in  the  last  note,  Hills  r.  McRae, 

1  An  acknowledgement  by  the  surviving  partner  of  a  firm  debt 
whereon  action  is  barred  by  the  Statute  of  Limitations,  will 
not  revive  it  as  to  the  estate  of  the  deceased  partner.  Espy  v. 
Comer,  76  Ala.  501  (1884) ;  Bloodgood  v.  Bruen,  8  N.  Y.  362  (1853). 

2  Blair  v.  Wood,  108  Pa.  St.  278  (1885);  Simpson  v.  Schulte,  21 
Mo.  App.  639  (1886);  Sampson  v.  Shaw,  101  Mass.  145  (1869); 
Silverman  v.  Chase,  90  111.  37  (1878). 

3  Hamersley  v.  Lambert,  2  Johns.  Ch.  508  (1817) ;  Dowell  v. 


AS  REGARDS  JOINT  CREDITORS.  671 

*  But,  as  pointed  out  in   an  earlier  chapter  (Bk.  II.  [  *598] 
c.  2,  §  1),  a  creditor  of  a  firm  is  not  in  the  same  posi-  Bk.  IV. 
tion  as  a  separate  creditor  as  regards  the  estate  of  a  £haP-  3-  Sect- 

deceased  partner.     A  creditor  of  the  firm,  unless  he  is  J 

also  a  separate  creditor  of  the  deceased  partner,  is  not  Creditor's 
entitled  to  the  ordinary  judgment  for  the  administration  ^mmistra- 
of  the  estate  of  the  deceased,  and  cannot  compete  with  tion  of 
an  ordinary  separate  creditor   in  the   administration  of  deceased 
such  estate  (*).     The  right  of  the  creditor  of  the  firm  partner's 
is  to  have  the  separate   estate  of  the  deceased  ascer-  estate- 
tained  and  applied  in  payment  of  his  separate  debts  and 
liabilities,  and  to  have  the  surplus  applied  in  payment 
of   his  joint   liabilities  (k).     If  an   action  has  already 
been  brought  for  the  administration  of  the  estate  of  the 
deceased,  a  creditor  of  the  firm  can  obtain  an  order  to 
the   above  effect  without  being  compelled  to  bring  a 
separate  action  himself  (I).     If  necessary  he  can  bring 
an  action  himself  (ra);  but  it   is  doubtful  whether  he 
can   proceed    by    an    originating    summons    in    cham- 
bers (n). 

Since  the  Judicature  acts  a  creditor  can,  it  is  appre- 
hended, sue  both  the  surviving  partners  and  the  execu- 
tors of  the  deceased  partner,  and  obtain  judgment 
against  them  all ;  the  judgment  against  the  executors 
being,  however,  of  course  limited  to  administration  in 
due  course  unless  assets  are  admitted.  But  to  work  out 
the  judgment  for  administration,  the  action,  if  not 
brought  in  the  Chancery  Division,  would  have  to  be 
transferred  to  it. 

As  will  be  seen  hereafter,  it  is  a  rule  in  bankruptcy  EigW  of 

. — creditors  of 

9  Ha.  297  :  Devaynes  r.  Noble,  Sleech's  case,  1  Mer.  539  ;  Steph- 
enson v.  Chiswell,  3  Ves.  566.  In  Rice  v.  Gordon,  11  Beav.  265, 
one  of  the  cases  ol  this  class,  the  debt  due  to  the  plaintiff  arose 
out  of  a  transaction  in  which  he  had  engaged  as  surety. 

(i)  Be  McRae,  25  Ch.  D.  16  ;  Re,  Hodson,  31,  ib.  177  ;  Re  Bar- 
nard, 32  ib.  447  ;  Kendall  v.  Hamilton,  4  App.  Ca.  504,  and  3  C. 
P.  D.  403.  Compare  Burn  v.  Burn,  3  Ves.  573,  where  a  bond 
creditor  of  the  firm  obtained  a  payment  as  if  he  had  been  a  sepa- 
rate specialty  creditor  of  the  deceased,  the  bond  being  treated 
as  joint  and  several. 

(ft)  Ibid.,  see  the  decree  in  Hills  v.  McRae,  9  Ha.  297,  and 
infra. 

(1)  Cowell  V.  Sikes,  2  Russ.  191  ;  Gray  v.  Chiswell,  9  Ves.  118. 
In  the  former  there  was  a  petition,  but  this  is  now  unnecessary. 

(mi)  Hills  v.  McRae,  9  Ha.  297,  is  an  instance  of  a  claim  ;  but 
claims  are  now  abolished. 

(hi  .Re  Barnard,  32  Ch.  D.  447  ;  as  to  the  conduct  of  proceed- 
ings where  there  are  two  actions,  one  by  a  joint,  and  another  by 
a  separate,  creditor,  see  Re  McRae,  25  Ch.  D.  16. 

Mitchell,  105  U.  S.  430  (1881);  Garrard  v.  Dawson,  49  Ga.  434 

(1873). 


672 


DEATH  AND  ITS  CONSEQUENCES 


Bk.  IV. 
Chap.  '3.  Sect. 
•> 

[*599] 
firm  com- 
pared with 
the  rights  of 
the  separate 
creditors  of 
the  deceased. 


that  the  debts  of  a  firm  shall  be  paid  out  of  the  assets 
of  the  firm,  and  the  separate  debt  of  each  partner  out 
of  his  separate  estate  :  and  in  administering  the  in- 
solvent estate  of  a  deceased  partner  *  the  same  rules 
have  now  to  be  adopted  (o).1     Accordingly  the  separate 

(o)  Jud.  Act,  1875.  \  10.  Even  before,  they  were  adopted  to 
some  extent.  See  Lodge  v.  Prichard,  1  De  G.  J.  &  Sm.  610. 
See  below,  p.  628,  note  (/). 

1  There  is  no  longer  any  general  bankrupt  law  in  force 
throughout  the  United  States,  but  whenever  a  fund  is  brought 
into  a  court  of  equity  for  distribution,  whether  that  court  be  a 
Probate  Court  or  a  court  clothed  by  statute  with  such  equitable 
powers  as  to  enable  it  to  administer  the  estate  of  an  insolvent, 
certain  principles  are  applied  which  had  their  origin  in  the  prac- 
tice of  the  English  courts  under  the  bankrupt  laws. 

The  general  rule  governing  the  distribution  of  the  estate  of  a 
firm  or  that  of  the  individual  partner  is  that  the  joint  estate 
shall  be  applied  primarily  to  the  payment  of  the  claims  of  joint 
creditors  and  the  separate  estate  shall  be  first  applied  to  the 
satisfaction  of  claims  upon  the  individual  partner.  This  is  al- 
most everywhere  adopted.  Harris  v.  Peabody,  73  Me.  262  (1881); 
Weaver  v.  Weaver,  46  N.  H.  188  (1865);  Bush  v.  Clark,  127 
Mass.  Ill  (1879);  Meech  v.  Allen,  17  N.  Y.  300  (1853);  Davis  v. 
Howell,  33  N.  J.  Eq.  72  (1880);  Hartman's  Appeal,  107  Pa.  St. 
327(1884);  Bailey  v.  Kennedy,  2  Del.  Ch.  12  (1835);  McCulloh 
v.  Dashiel,  1  Hart  &  G.  96  (1827);  Gordon  v.  Cannon,  18  Gratt. 
387  (1868);  Woddrop  v.  Price,  3  Desaus,  203  (1811);  Keese  v. 
Coleman,  72  Ga.  658  (1884);  Evans  v.  Winston,  74  Ala.  349 
(1883);  Schmidlapp  r.  Currie,  55  Miss.  597  (1878);  Forbes  v. 
Scannell,  13Cal.  242  (1859);  Doggett  v.  Dill,  108111.  560  (1884); 
Fullam  i>.  Abrams,  29  Kan.  725(1883).  In  Kentucky  it  has  been 
held  that  where  the  firm  is  insolvent  and  there  are  joint  and 
separate  creditors  and  a  joint  and  separate  estate,  the  separate 
creditors  are  entitled  to  receive  from  the  separate  estate  as  large 
a  percentage  of  their  claim  as  has  been  received  out  of  the  firm's 
assets  by  the  joint  creditors,  and  that  the  balance  of  the  separate 
estate  shall  be  distributed  among  both  classes  of  creditors  pro- 
portionately to  the  balance  due  each  claimant.  Bank  v.  Keney, 
79  Ky.  133  (1880).  This  rule  at  one  time  prevailed  in  Pennsyl- 
vania. Bell  v.  Newman,  5  S.  &  R.  78  (1819).  In  Camp  v.  Grant, 
21  Conn.  41  (1851),  no  difference  was  made  between  joint  and 
separate  creditors  in  the  distribution  of  a  decedent's  estate.  The 
joint  debtors  of  two  partners  whose  claim  did  not  arise  in  any 
partnership  transaction  have  no  right  to  share  in  the  firm's  assets. 
Hulse's  Estate,  11  W.  N.  C.  499  (1882).  Generally  speaking, 
the  separate  creditors  lose  their  priority  over  joint  creditors  in 
the  distribution  of  the  separate  estate  if  there  is  no  joint  estate 
and  no  living  solvent  partner.  Strauss  v.  Kerngood,  21  Gratt. 
584  (1871);  Vanwagner  v.  Chapman,  29  Ala.,  172  (1856);  Harris 
v.  Peabody,  73  Me.  262  (1881);  McCulloh  v.  Dashiel.  1  Har.  & 
G.  96  (1827);  Brock  v.  Bateman,  25  Oh.  St.  508  (1874);  Pahlman 
ft>.  Graves,  25  111.  405  (1861);  D'Invillier's  Est.,  13  Phila.  362 
(1880).  A  partner  or  his  representatives,  to  whom  his  firm  owes 
money,  cannot  claim  against  the  firm  estate  with  the  joint  cred- 
itors. Bennett's  Est.,  13  Phila.,  331  (1880);  Houseal's  Appeal, 
45  Pa.  St.  484  (1863);  Amsinck  v.  Bear,  22  Wall.  395(1874);  un- 
less the  claim  of  the  partner's  estate  arises  out  of  some  fraudu- 


AS  REGARDS  JOINT  CREDITORS.  673 

estate  of  a   deceased  partner  must  be  applied  in  pay-  Bk.  IV. 
ment  of  all  principle   and  interest  due  to  his  separate  Chap.  3.  Sect. 

creditors  before  any  part  of  such,  estate  can  be  touched  J 

by  the  creditors  of  the  firm  (p);  and  this  rule  applies 
even  although  the  surviving  partners  may  be  bank- 
rupt (q).  If,  indeed,  there  is  not  and  never  was,  since 
the  death  of  the  deceased,  any  joint  estate  whatever, 
and  no  solvent  partner,  it  seems  that  the  joint  creditors 
may  rank  pari  passu  with  the  separate  creditors  of  the 
deceased,  against  his  separate  estate  (r). 

Again,  the  rule  which  in  bankruptcy  precludes  one 
partner  from  proving  against  the  separate  estate  of  his 

(p)  See  Lodge  v.  Prichard,  1  De  G.  J.  &  Sm.  610,  and  4  Giff. 
294 ;  Whittingstall  v.  Grover,  10  W.  E.  53;  Gray  v  Chiswell, 
9  Ves.  118;  Addis  v.  Knight,  2  Mer.  117;  Croft  v.  Pyke,  3  P. 
W.  182.  As  to  interest  after  the  administration  order,  see  Ex 
parte  Findlay,  17  Ch.  D.  334,  and  §  10  of  the  Jud.  Act,  1875. 

(q)  Lodge  v.  Prichard,  and  Whittingstall  v.  Grover,  ubi  sup. 
See,  as  to  winding  up  the  estate  of  a  deceased  partner  in  bank- 
ruptcy, where  the  surviving  partners  are  bankrupt,  Ex  parte 
Gordon,  8  Ch.  555  ;  Morley  v.  White,  ib.  214. 

(r)  See  Cowell  v.  Sikes,  2  Puss.  191  ;  and  Lodge  v.  Prichard, 
ubi  sup.  Qu.  if  the  Jud.  Act,  §  10,  has  introduced  the  other  ex- 
ceptions recognized  in  bankruptcy  in  cases  of  fraud  and  distinct 
trades,  see  infra,  Bk.  IV.  c.  4,  §  4.     See  below,  p.  628, note  (/). 

lent  conversion  of  a  portion  thereof  to  the  partnership's  use.  See 
Rodgers  v.  Meranda,  7  Oh.  St.  179  (1857);  or  unless  the  claim  is 
one  due  another  firm  of  which  the  partner  is  a  member  or  is  for 
a  debt  contracted  to  him  when  separately  carrying  on  a  distinct 
business   from  that  in   which   the  insolvent  firm  was  engaged. 

Houseal's  Appeal,  45  Pa.   St.  484  ( );  Buckner  v.  Caleote,  28 

Miss.  432  (1855). 

Neither  can  the  firm  claim  against  the  separate  estate  of  an 
individual  partner  for  a  debt  owing  it  until  his  separate  credit- 
ors have  been  paid  in  full.  Amsinck  v.  Bean,  22  Wall,  395 
(1874);  Somerset  Potters'  Works  v.  Mindt,  10  Cush.  592  (1852); 
but  if  the  debt  was  incurred  to  the  firm  fraudulently,  it  can 
claim  ;  sec  In  re  Hamilton,  1  Fed.  Rep.  800  (1880). 

A  solvent  partner  cannot  claim  against  his  co-partner's  sepa- 
rate estate  along  with  the  )oint  creditors  of  the  firm.  Hill  v. 
Beach,  12  X.  J.  Eq.  31  (1855);  Amsinck  v.  Bean,  22  Wall.  395 
(1874).  If  he  has  paid  the  firm  debts,  however,  he  can  prove 
against  it  in  competition  with  the  separate  creditors  of  his  part- 
ner. Scott's  Appeal,  88  Pa.  St.  173  (1878);  Hill  v.  Beach.  12  N. 
J.  Eq.  31  (1855). 

If  a  joint  creditor  has  secured  a  lien  upon  the  separate  estate 
of  a  partner,  he  can  enforce  it  despite  the  rule  of  distribution. 
Straus  v.  Kerngood,  21  Gratt.  584  (1871);  Preston  v.  Colby,  117 
111.  477  (1886);  Cummings'  Appeal,  25  Pa.  St.  268  (1855).  And  if  a 
joint  creditor  has  acquired  a  security  charged  on  the  separate 
estate,  or  a  separate  creditor  a  similar  hold  upon  the  partnership 
property,  he  is  at  liberty  in  either  case  to  realize  on  his  security 
or  prove  his  debt.  Wilder  v.  Keeler,  :'»  Paige,  167  (1832);  Bank 
v.  Jefferson,  138  Mass.  Ill  (1884);  Roberts  v.  Oldham,  63  N.  Ca. 
297  (1869). 

*  20   LAW  OF  PARTNERSHIP. 


(>74 


DEATH  AND  ITS  CONSEQUENCES 


Bk.  IV. 

Chap.  3.  Sect. 
2. 

Share  in 
firin  not 
available  for 
separate 
creditors  till 
joint  credi- 
tors are 
paid. 


Action  bv 

[  *  600] 

joint  credi- 
tors. 
Brett  v. 
Beckwith. 


Judgment  in 
action  by 
creditors  of 
firm  against 
the  executor 
of  a  deceased 
partner. 


co-partner,  whilst  the  joint  debts  are  unpaid,  also  ap- 
pliqs  in  administering  the  estate  of  a  deceased  part- 
ner (s). 

The  separate  estate  thus  primarily  liable  to  the  sep- 
arate creditors  of  the  deceased,  does  not  include  his 
share  in  the  partnership  assets  ;  for  he  has  no  share  in 
those  assets,  except  subject  to  the  payment  of  the  debts 
of  the  firm.  Whilst,  therefore,  the  separate  creditors 
of  the  deceased  are  entitled  to  be  first  paid  out  of  his 
separate  estate,  the  creditors  of  the  firm  are  entitled  to 
be  first  paid  out  of  its  assets,  and,  consequently,  to  be 
paid  in  full  before  the  share  of  the  deceased  in  those 
assets  becomes  available  for  the  payment  of  his  separate 
creditors  (t). 

Actions  by  creditors  of  the  firm  to  obtain  payment 
out  of  the  *  assets  of  a  deceased  partner,  are  well  illus- 
trated by  Brett  v.  Beckwith  (u).  In  that  case  there  had 
been  two  partners,  Young  and  Beckwith.  Beckwith 
was  dead,  and  Young  was  bankrupt.  A  bill  was  filed 
by  the  creditor  of  the  late  firm  against  the  executors  of 
Beckwith  and  the  assignees  of  Young,  praying  for  a 
declaration  that  Beckwith's  real  and  personal  estate 
was  liable  in  equity,  after  satisfying  his  separate  debts, 
to  the  joint  debts  of  the  firm  ;  for  an  account  of  such 
debts  at  Beckwith's  death  ;  for  an  account  of  the  joint 
assets  received  by  his  executors  and  Young's  assignee's; 
for  an  account  of  Beckwith's  separate  debts  ;  that  his 
real  and  personal  estate  might  be  applied,  first  in  pay- 
ment of  his  separate  debts,  and  then  in  payment  of  the 
joint  debts  ;  and  that  a  receiver  might  be  appointed  to 
get  in  the  outstanding  joint,  assets.  The  Court  held 
that  the  plaintiff  was  clearly  entitled,  as  a  creditor  of 
Beckwith,  to  have  his  estate  fully  administered  ;  and 
for  that  purpose  to  have  an  account  taken  of  his  sepa- 
rate estate  ;  and  to  have  the  accounts  between  Beck- 
with's executors  and  Young's  assignees  also  taken,  in 
order  to  ascertain  of  what  the  joint  estate  consisted  ; 
and  a  decree  was  accordingly  made  for  taking  such  ac- 
counts. 

When  a  creditor  of  the  firm  proceeds  against  the  as- 
sets of  a  deceased  partner,  the  form  of  the  judgment 
which  is  given  is  in  substance  as  follows  (x): — 

(s)  Lacey  v.  Hill,  8  Ch.  441.  Compare  Ex  parte  Topping,  4 
De  G.  J.  &  Sm.  551. 

(t)  See  Ridgway  v.  Clare,  19  Beav.  Ill  ;  Hills  v.  McRae,  9  Ha. 
297. 
~  («)  3  Jur.  N.  S.  31. 

(x)  See  Hills  v.  McRae,  9  Ha.  297  ;  Harris  v.  Farwell.  13  Beav. 
407  ;  Rice  v.  Gordon,  11  Beav.  271. 


AS  REGARDS  JOINT  CREDITORS.  675 

1.  It  is  declared  that  all  persons  who  are  creditors  of  Bk.  IV. 

the  deceased,  are  entitled  to  the  benefit   of  the'judg-  C"aP-  3- Sect. 

ment.  1 r 

2.  It  is  declared  that  the  surplus  of  the  estate  of  the 
deceased,  after  satisfying  his  funeral  and  testamentary 
expenses  and  separate  debts,  was  liable  at  the  time  of 
his  death  to  the  joint  debts  of  the  firm,  but  without 
prejudice  to  the  liability  of  the  surviving  partner,  as 
between  himself  and  the  estate  of  the  deceased. 

3.  Ad  account  is  directed  to  be  taken  of  the  funeral 
and  testamentary  expenses  and  separate  debts  of  the 
deceased,  and  of  the  debts  of  the  firm.  If  the  surviving 
partner  is  not  a  party  to  the  action,  liberty  is  given  him 
to  attend  in  the  prosecution  of  this  last  inquiry. 

*  4.  An  account  is  directed  to  be  taken  of  the  personal 
estate  of  the  deceased.  [  *  601  ] 

5.  It  is  ordered  that  his  personal  estate  be  applied, 
in  the  first  instance,  in  the  payment  of  his  separate 
debts  and  funeral  expenses,  in  a  due  course  of  admini- 
stration, and  then  in  payment  of  the  debts  of  the  firm. 

6.  And  if  the  personal  estate  of  the  deceased  is  in- 
sufficient for  the  purposes  of  the  action,  inquiries  are 
ordered  to  be  made  for  the  purpose  of  ascertaining  the 
real  estate  to  which  the  deceased  was  entitled. 

The  judgment  will,  if  necessary,  direct  inquiries 
whether  the  creditors  of  the  firm  continued  to  deal  with 
the  surviving  partners,  and  what  sums  have  been  paid 
by  them  to  such  creditors,  .and  whether  the  creditors 
have,  by  their  dealings  with  the  surviving  part- 
ners, released  the  estate  of  the  deceased  from  the  pay- 
ment of  their  respective  debts  (y). 

Additional  inquiries  will  be  directed  if  necessary, 
and  as  the  necessity  for  them  appears  (z). 

No  directions  are  usually  given  for  the  purpose  of 
keeping  distinct  the  joint  and  the  separate  estates;  but, 
if  necessary,  it  is  conceived  that  such  directions  would 
be  given  in  order  that  the  principles  upon  which  the 
judgment  is  framed  might  be  properly  carried  out  (a). 

In  Ridgivay  v.  Clare  (b)  two  partners,  A.  and  B.,  had  Ridg^ay  v. 
died.     A  suit  was  instituted  by  a  separate  creditor  of  Clare. 

(y)  See  the  decree  in  Devaynes  v.  Noble,  1  Mer.  530,  and  in 
Fisher  v.  Farrington,  Seton  on  Decrees,  ed.  4,  p.  1210. 

(z)  Barber  v.  Mackrell,  12  Ch.  D.  534,  as  to  money  fraudu- 
lently withdrawn  by  one  partner  from  the  assets  of  the  firm. 

(a)  See  Rice  r.  Gordon,  11  Beav.  271;  Ridgway  v.  Clare,  19 
Beav.  Ill;  "Woolley  v.  Gordon,  Tarul.  11;  Paynter  v.  Houston.  3 
Mer.  297. 

(6)  Ridgway  v.  Clare,  l'J  Beav.  111. 


676 


DEATH  AND  ITS  CONSEQUENCES 


Bk.  IV. 

Chap.  3.  Sect. 
2. 


[*602] 


Secured 
creditors. 


Creditors' 
right  to 
proceed  both 
against  the 
survivors 
and  against 
the  estate  of 
the  deceased, 
Before  the 
Judicature 
Acts. 


A.  for  the  administration  of  his  estate;  a  suit  was  also 
instituted  by  a  separate  creditor  of  B.  for  the  adminis- 
tration of  his  estate;  a  third  suit  was  instituted  by  a 
joint  creditor  of  A.  and  B.  for  payment  of  a  debt  due 
from  both  out  of  both  their  estates;  and  a  fourth  suit 
was  instituted  by  the  representatives  of  A.  against  the 
representatives  of  B.  for  taking  the  accounts  of  the 
partnership.  The  plaintiff  in  the  third  suit  was  found 
to  be  a  creditor  *  of  both  A.  and  B.,  but  he  was  held 
by  the  Master  not  to  be  entitled  to  rank  as  a  separate 
creditor  of  A.  On  an  appeal  from  the  decision  of  the 
Master,  the  Court  thought  it  desirable  that  the  sepa- 
rate creditors  should  be  ascertained,  but  reserved  the 
question  whether  the  joint  creditor  was  or  was  not  en- 
titled to  rank  as  one  of  A.'s  separate  creditors.  The 
judgment,  however,  is  instructive,  as  it  states  the  man- 
ner in  which  the  Court  administers  the  assets  of  a  de- 
ceased partner,  and  pays  each  class  of  creditors.  It 
appears  that  when  there  are  assets  sufficient  to  pay  all 
the  creditors,  the  estate  of  the  deceased  forms  one  fund, 
out  of  which  the  joint  and  separate  creditors  are  paid 
pari  passu;  but  that  they,  and  the  funds  for  their  pay- 
ment, are  distinguished  when  the  assets  are  in  any  way 
deficient. 

A  creditor  who  holds  a  security,  cannot  retain  his 
security  and  proves  for  his  whole  debt,  nor  realise  his 
security  and  prove  for  more  than  the  balance  then  re- 
maining due  to  him;  if  he  proves  for  his  whole  debt 
he  must  give  up  his  security  as  in  bankruptcy.  The 
rule  in  chancery  was  formerly  otherwise  (c).  This, 
however,  was  altered  by  the  Judicature  Act,  1875  (d). 

The  creditors  of  a  partnership  having,  on  the  death 
of  one  of  the  partners,  a  right  to  obtain  payment  from 
the  surviving  partners,  and  out  of  the  assets  of  the  de- 
ceased partner,  the  question  arises  whether  the  cred- 
itors can  enforce  both  these  rights,  or  whether  they  can 
only  avail  themselves  of  one  of  them. 

Before  the  Judicature  Acts,  if  the  creditors  proceed- 
ed at  law  against  the  surviving  partners,  but  did  not 
obtain  satisfaction,  they  could  afterwards  proceed  in 
equity  against  the  estate  of  the  deceased  partner  (e). 
So  if  the  surviving  partners  became  bankrupt,  and  the 
creditors  of  the  firm  proved  against  their  estate  and  re- 


(c)  Bonser  v.  Cox,  6  Beav.  84;  Mason  ?>.  Bogg,  2  M.  &  Cr.  443; 
Kellock's  case,  3  Ch.  769. 

(d)  §  10;  the  act  only  applies  to  the  estates  of  persons  dying 
after  its  commencement. 

(e)  Jacomb  v.  Harwood,  2  Ves.  S.  265. 


AS  REGARDS  JOINT  CREDITORS.  GT7 

ceived  i  dividend,  they  migbt  nevertheless  afterwards  Bk.  IV. 
proceed  against  the  estate  of  the  deceased  (/).     Again,  CQaP-  •'•  SfcCt- 

*as  the  creditors  of  the  firm  conld  not  in  equity  obtain  _1 

any  decree  for  payment  by  the  surviving  partners,  but  [  *G03] 
only  a  decree  for  payment  out  of  the  assets  of  the  de- 
ceased partner,  there  was  no  reason  wby,  even  after  a 
decree  for  the  administration  of  the  estate  of  the  de- 
ceased, the  creditors  in  question  should  not  also  pro- 
ceed at  law  against  the  surviving  partners.  If,  how- 
ever, it  could  be  shown  that  injustice  would  be  pro- 
duced by  allowing  the  creditor  to  pursue  both  his  rem- 
edies at  once,  the  Court  would  perhaps  have  compelled 
him  to  elect  between  them,  or  have  restrained  him  from 
proceeding  at  law  (g). 

The  Judicature  Acts  h  ave  so  far  altered  the  practice  since  the 
as  to  allow  one  action  to  be  brought  against  the  sur-  Judicature 
viving  partners  and  the  legal   personal   representatives  Acts- 
of  the  deceased;  and  the  creditor  will  practically  obtain 
payment  from  the  survivors  or  the  estate   as  may  be 
most  convenieat;  but  if  the  estate  of  the  deceased  is 
not  sufficient  to  pay  his  separate  creditors,  the  creditors 
of  the  firm  will  not  be  able  to  compete  with  them,  but 
will  have  to  look  to  the  surviving  partners  (h).     A  judg- 
ment, however,  against  the  surviving  partners  is  no  bar 
to  an  action  against  the  executors  of  a  deceased  part- 
ner; nor  is  a  judgment    against  the  latter  a  bar  to  an 
action  against  the  former  (i),  unless  the  personal  lia- 
bility  of  the  surviving   partners  was  sought  to  be  en- 
forced in  the  action  against  the  executors. 

If  more  than  one  partner  is  dead,  a  creditor  of  the  One  action 
firm  may,  in  one  action  obtain  a  judgment  against  the  against  the 
estates  of  all  of  the  deceased  partners.  several 

In  a  case  before  the  late  Vice-Chancellor  Shadwell  deceased 
there  was  a  partnership  of  seven  persons,  A.,  B.,  C,  partners. 
&c,  and  another  partnership,  A.  &  B.,  composed  of  two  Brown  v. 
of  the  members  of  the  first.  A.  and  C  were  dead.  The  Douglas, 
surviving  partners  were  bankrupt.  The  plaintiff,  who 
was  a  creditor  of  both  firms,   *  filed  a  bill  on  behalf  of  [  *  604] 

(/)  Heath  v.  Percival,  1  P.  W.  682;  Devaynes  v.  Noble 
(Sleech's  case),  1  Mer.  539. 

{g)  See,  as  to  the  considerations  -which  guided  the  Court,  Ex 
parte  Kendall,  17  Ves.  525  and  526.  If  one  partner  becomes 
bankrupt,  and  a  creditor  of  the  firm  proves  against  his  estate,  he 
cannot  afterwards  sue  the  bankrupt  and  his  co-partners  jointly. 
See  Bradley  v.  Millar,  1  Rose,  273.  The  subject  of  election  in 
bankruptcy  will  be  examined  hereafter. 

(It)  See  ante,  p.  598,  and  Jud.  Act,  1875,  I  10. 

(i)  Re  Hodgson,  31  Ch.  D.  177;  Jacomb  v.  Harwood,  2  Yes  S. 
265;  Liverpool  Borough  Bank  v.  Walker,  4  De  G.  &  J.  24.  See 
ante,  Bk.  II.  c.  2  §  1. 


678  DEATH  AND  ITS  CONSEQUENCES 

Bk.  IV.  ^  himself  and  all  other  the  creditors  of  A.,  and  on  behalf 
Chap.  3.  Sect.  Q£  h.jmseif  anc\  a\i  other  the  creditors  of  C, against  the  real 
and  personal  representatives  of  A.,  tht>  personal  repre- 
sentatives of  C,  and  the  assignees  of  the  bankrupts. 
The  bill  prayed  that  an  account  might  be  taken  of  what 
was  due  from  A.  and  C.  respectively  to  the  plaintiff, 
and  their  other  joint  and  separate  creditors,  and  of  the 
personal  estates  of  A.  and  C.,  and  of  the  real  estate  of 
A.,  and  that  the  personal  estates  of  A.  and  C.  and  the 
real  estate  of  A.  might  be  applied  in  payment  of  their 
respective  debts,  as  well  joint  as  separate.  This  bill 
was  demurred  to  on  the  ground  of  multifariousness, 
but  the  Vice- Chancellor  overruled  the  demurrer,  and 
held  the  frame  of  the  suit  to  be  proper  in  point  of 
form  (k). 

2.    With  reference  to  what  has  occurred  since  death. 

Having  now  examined  the  position  of  the  executors 
of  a  deceased  partner,  with  reference  to  the  creditors  of 
the  firm,  and  in  respect  of  debts  existing  at  the  time  of 
the  death  of  the  deceased,  it  is  proposed  to  consider 
the  liability  of  the  assets  of  the  deceased,  and  of  his 
executors,  in  respect  of  what  may  have  taken  place  since 
his  death. 
Personal  With  respect  to  the  executors  themselves,  it  is  clear 

liability  of  that  if  the  executor  of  a  deceased  partner  carries  on  the 
executors.  partnership  business,  the  executor  becomes  personally 
liable  to  third  parties  as  if  he  were  a  partner  in  his 
own  right  Z);1  and  if  the  executor  accepts  or  indorses 
bills  of  exchange  or  promissory  notes  either  in  his  own 
name  as  executor  {in),  or  in  the  name  in  which  the  de- 
ceased carried  on  business  (n),  the  executor  will  be 
personally  liable  to  be  sued  on  such  bills  or  notes. 
[  *605]        Whether  *in  such  cases  the  executor  is  entitled  to  be 

(k)  See  Brown  v.  Douglas,  11  Sim.  283;  Brown  v.  Weatherby, 
12  Sim.  6.  Since  the  Judicature  acts  it  is  a  mere  question  of 
convenience  whether  there  shall  be  one  action  or  more.  See  Ord. 
XVI.  rr.  4,  16,  and  Ord.  XVIII.  rr.  1  and  6. 

(I)  See  Wightman  v.  Townroe,  1  M.  &  S.  412;  Labouchere  v. 
Tupper,  11  Moo.  P.  C.  198;  Ex  parte  Garland,  10  Ves.  119;  Ex 
parte  Holdsworth,  1  M.  D.  &  D.  475.  As  to  his  liability  to  cred- 
itors by  merely  sharing  profits  with  the  surviving  partners,  see 
Holme  v.  Hammond,  L.  R.  7  Ex.  218,  ante,  p.  32.  See  as  to  the 
executors  of  sole  traders.  Be  Evans,  34  Ch.  D.  597. 

(in)  Liverpool  Borough  Bank  v.  Walker,  4  De  G.  &  J.  24. 

(n)  Lucas  v.  Williams,  3  Giff.  150. 

1  Wild  v.  Davenport,  48  N.  J.  L.  129  (1886);  Phillips  v.  Blatch- 
ford,  137  Mass.  510  (1884);  Richter  v.  Poppenhausen,  42  N.  Y. 
373  (1870). 


AS  REGARDS  JOINT  CREDITORS.  679 

indemnified  out  of  the  assets  of  the  deceased  is  alto-  Bk.  IV. 
gether  another  question ;  and  depends   upon  whether  ChaP-  3.  Sect. 

the  executor  has  carried  on  the  business  pursuant  to  the  J 

will  of  the  deceased,  or  the  directions  of  those  benefi- 
cially interested  in  his  estate. 

With  respect  to  the  direct  liability  of  the  assets  of  Liability  of 
the  deceased  to  creditors,  it  may  be  taken  as  a  general  estate  '  °*  de- 
proposition,  that  the  estate  of  a  deceased  partner  is  not  partner  tor 
liable  to  third  parties  for  what  may  be  done  after  his  what  occurs 
decease  by  the  surviving  partners  ;'  and  on  that  ground  after  his 
it  has  been  held  that  tbey  cannot  be  restrained  at  the  death, 
suit  of  the  executors  of  the  deceased  from  continuing 
to  carry  on   the   business  of  the   late   firm  in  the   old 
name  (o). 

In  the  great  case  of  Devaynes  v.  Noble  (p),  some  bills  Devaynes  v. 
deposited  with  a  firm  of  bankers  were,  after  the  death  Noble. 
of  one  of  the  partners,  misapplied  by  the  surviving 
partners,  and  an  attempt  was  made  to  obtain  out  of  the 
estate  of  the  deceased  the  value  of  the  bills  so  misap- 
plied. But  the  attempt  was  not  successful  ;  Sir  Wm. 
Grant  observing — 

"If  there  be  no  remedy  at  law  against  the  executors  of  Mr. 
Devaynes,  I  am  at  a  loss  to  understand  the  equity  on  which  this 
Court  is  to  interpose  to  make  good  the  loss  against  Mr.  Devaynes' 
estate.  It  has  not  been  incurred  by  anything  that  he  did  or  ne- 
glected to  do.  The  bills  were  safely  kept  as  long  as  he  had  any- 
thing to  do  with  them.  From  the  act  of  placing  them  in  the 
custody  of  a  partnership,  it  followed  that  upon  the  death  of  one 
of  the  partners  they  would  fall  into  the  possession  of  the  surviv- 
ing partners.  Mr.  Houlton  himself,  therefore,  has  virtually 
placed  them  there.  Mr.  Devaynes'  executors  could  not  take  them 
away  ;  Mr.  Devaynes  could  not  direct  his  executors  to  take  them 
away  ;  and  though  Mr.  Devaynes  has  neither  been  personally  in- 
strumental in  the  loss,  nor  personally  benefited  by  it,  nor  could 
have  prevented  it,  yet  it  is  contended  that  it  is  upon  his  estate 
the  loss  ought  to  be  thrown,  and  that  by  a  court  of  equity.  I 
apprehend,  however,  that  it  would  be  the  reverse  of  equity  to 
throw  the  loss  on  his  estate  in  such  a  case  as  the  present.  It 
might  be  as  well  contended  that  if  they  had  thrown  the  bills 
into  the  fire,  or  lost  them  by  negligence,  Mr.  Devaynes  would  bo 

(o)  Webster  v.  Webster,  3  Swanst.  490,  note.  But  see  as  to 
selling  good-will,  auk',  p.  443. 

(p)  Houlton's  case,  Johne'S  case,  and  Brice's  case,  1  Mer.  GIG, 
&c.     See,  too,  Vulliamy  v.  Noble,  3  Mer.  614. 

1  Caldwell  v.  Stileman,  1  Rawle,  212  (1829);  Dickinson  v. 
Dickinson,  25  Gratt.  321   (1874);  Lyon  v.  Johnson,  28  Conn.  1 

(18.3'J). 


680 


DEATH  AND  ITS  CONSEQUENCES 


Bk.  IV.  responsible  for  such  act  or  negligence.      He  had  r.r>  more  to  do 

Chap.  3.  Sect.  with  the  sale  of  the  bills  than  he  would  have  had  to  do  with  a 
J loss  occasioned  by  such  means  as  these." 


[  *  606] 

Liability  of 
the  assets 
for  the  acts 
of  the 
executor. 


Effect  of 
employment 
of  assets  in 
the  business 
of  the  firm. 


[  *  607] 


*  Moreover,  although  an  executor  has  power  to  dis- 
pose of  the  assets  of  the  deceased,  and  to  keep  alive 
demands  against  them  which  would  otherwise  become 
barred  by  the  statute  of  limitations,  still  the  acts  of  an 
executor,  to  whatever  extent  they  may  render  him  per- 
sonally liable,  do  not  impose  liability  on  the  assets  of 
the  deceased,  unless  those  acts  have  been  properly  per- 
formed by  the  executor  in  the  execution  of  his  duty  as 
executor.  At  the  same  time,  there  are  certain  acts 
which,  if  done  by  an  executor,  impose  liability  on  the 
assets  of  the  deceased  (g);  and,  therefore,  if  a  partner 
appoints  a  co-partner  his  executor,  and  dies,  and  the  ex- 
ecutor continues  to  carry  on  the  business,  it  is  possible 
that  some  of  his  acts,  attributed  to  him,  not  as  part- 
ner, but  as  executor,  may  render  the  assets  of  the  de- 
ceased liable  for  what  may  have  occurred  since  his 
death  (?•).     But  this  is  quite  an  exceptional  case  (s). 

If  an  executor  of  a  deceased  partner  carries  on  the 
partnership  business  pursuant  to  directions  contained 
in  the  will  of  his  testator,  the  executor  will,  as  already 
pointed  out,  render  himself  personally  liable  for  debts 
contracted  in  so  doing,  but  he  will  be  entitled  to  in- 
demnity in  respect  thereof  out  of  iliD  estate  of  the  de- 
ceased (t) ;  and  consequently  if  a  deceased  partner  has 
himself  directed  his  assets  or  any  part  thereof  to  be  em- 
ployed in  carrying  on  the  partnership  bxisiness,  so  much 
of  them  as  are  directed  to  be  employed,  are  liable  to 
make  good  the  debts  contracted  during  their  employ- 
ment. For  these  reasons,  and  to  this  extent,  there- 
fore, his  estate  will  be  applicable  to  the  liquidation  of 
the  demands  of  those  who  have  become  creditors  of  the 
partnership  after  his  decease.  But  it  must  not  be  sup- 
posed that  a  creditor  of  an  executor  or  trustee  can  al- 
ways stand  in  his  place  to  the  extent  to  which  he  is  en- 
titled to  be  indemnified  out  of  the  trust  estate.  Prima 
facie  a  creditor  must  look  for  payment  to  his  legal 
debtor,  and  the  fact  that  the  latter  is  entitled  to  be  in- 
demnified by  some  one  *    else,  or  out   of   some   estate, 

(q)  See  Williams  on  Executors,  vol.  ii.  1798,  ed.  8. 

(r)  See  Vulliamv  ».  Noble,  3  Mer.  614. 

(s)  See  Re  Evans,  34  Ch.  D.  597  ;  Strickland  v.  Svmons.  26  ib. 
245  ;  Be  Johnson. 15  ib.  548  ;  Farhall  c.  Farhall.  7  Ch.  123  ;  Owen 
v.  Delamere,15Eq.  134. 

(t)  Labouchere  r.  Tapper,  11  Moore,  P.  C.  198,  and  the  cases 
in  the  following  notes. 


AS  REGARDS  JOINT  CREDITORS,  681 

does  not  confer  any   additional  right  on  the  creditor.  Bk.  IV. 

To  avail  the  creditor  something  more  is  necessary,  viz.,  ^haP-  3-  Sett- 

the  existence  of  a  trust  fund  expressly  devoted  to  carry-  J 

ing  on  the  business  in  respect  of  which  the  debt  to  the 
creditor  has  been  contracted  (u).1 

In  Strickland  v.  Symons  (x),  a  lunatic  asylum  was  Strickland  v. 
vested  in  the  defendant  on  trust  for  sale.  He  carried  Syinons. 
it  on  for  a  time  and  then  sold  it  for  a  large  sum  of 
money.  The  plaintiff  had  supplied  the  defendant  with 
goods  for  the  use  of  the  asylum,  and  not  being  able  to 
obtain  payment  fi-om  the  defendant  the  plaintiff  brought 
an  action  for  payment  out  of  the  trust  estate.  But  he 
was  held  not  entitled  to  such  payment,  there  being  no 
particular  trust  estate  appropriated  for  the  purpose  of 
carrying  on  the  asylum. 

In  Re  Evans  (y),  the  widow  and  administratrix  of  a  Re  Evans. 
deceased  builder  carried  on  his  business,  and  in  so  do- 
ing contracted  debts  to  the  plaintiff.  The  plaintiff  ob- 
tained judgment  against  her  and  sought  to  obtain  pay- 
ment out  of  the  proceeds  of  the  sale  of  the  goods  which 
she  had  bought,  but  which  proceeds,  as  between  her 
and  the  estate,  were  assets  of  the  deceased.  It  was 
held  that  the  plaintiff  was  not  entitled  to  any  such  re- 
lief. The  plaintiff  was  declared  entitled  to  a  lien  on 
the  beneficial  interest  of  the  widow  in  the  estate  of  the 
deceased.  This  was  the  utmost  he  could  be  entitled  to; 
and  the  Court  of  Appeal  carefully  refrained  from  de- 
ciding whether  he  was  entitled  to  so  much. 

If,  however,  there  is  a  trust  fund  specially  appro-  Trust  to 
priated  to  carrying   on  a  particular  business,  and  the  carry  on 
trustee  in  carrying  it  on  contracts   debts,  the  creditors  business, 
are  entitled,  not  indeed  to  payment  out  of  the  fund  as 
cestuis  que  trustent,  but  to  stand  in  the  place  of  the 
trustee,  and  to  obtain   out   of   the  fund  what,  if   any- 
thing, may  be  payable   to   him  by   way   of  indemnity. 
But  if  he  is  a  defaulting   trustee  the  creditors  can  ob- 
tain nothing  out  of  the  trust  fund   until  he   has  made 
good  what  he  owes  it.     The  most  recent  case   on  this 
subject  is  Re  Johnson  (z),  in  which    *  the  previous  au-  [  *  608] 

I  a  See,  in  addition  to  the  cases  cited  below,  the  American  au- 
thorities, Jones  v.  Walker,  13  Otto,  441 ;  Smith  v.  Ayres,  101  U. 
S.  3:20. 

(.c)  26  Ch.  D.  245,  and  22  ib.  666. 

iy)  Re  Evans,  34  Ch.  D.  556.  Observe  that  the  plaintiff"  had 
not  seized  the  goods  under  afl.  fa. 

(z)  Re  Johnson,  15  Ch.  D.  548. 

1  See,  also.  Pitkin  r.  Pitkin,  7  Conn.,  307  (1828);  Burwell  v. 
Mandeville,  2  How.  560  (1844). 


6S2  DEATH  AND  ITS  CONSEQUENCES 

Bk.  IV.  thorities  were  reviewed   by  Jesse],  M.  R,  and  in  which 

Chap.  3.  Sect.  ^e  right  0f  the  creditors  to  the  extent  above  stated  but 

_ no  further  is  clearly  enunciated. 

Proof  by  the       Most  of  the  other  cases  which   have  occurred   upon 
executor  in     this  subject,  have  arisen  where  an  executor,  having  con- 
b^kr^tev    ^i11116^  m  business  with  a  surviving  partner,  and  hav- 
ing become  bankrupt  with  him,   has  endeavoured   to 
withdraw  from  the  joint  estate  the  assets  of  the  deceas- 
ed employed  in  the  trade.     In  such   cases,  the  execu- 
tor has  been  held  entitled  to  prove  for  the  value  of  the 
assets  which  he  embarked  in  the  business  without  au- 
thority, such  assets  being  in  substance  an  unauthorised 
loan  of  trust  money;  but  he  has  been  held  not  entitled 
to  prove  as  against  joint  creditors  for  the  value  of  those 
assets  which  his  testator  authorised  to  be  so  continued 
in  the  business. 
Ex  parte  In  Ex  parte  Garland  (a),  a  miller  and  farmer  made 

Garland.  a  will  whereby  he   directed   his   wife  to   carry   on   his 

business,  and  that  for  the  purpose  of  enabling  her  to 
cai'ry  it  on,  any  sum  not  exceeding  600 ?.  should  be  ad- 
vanced to  her  by  his  trustees.  He  also  directed  his 
wife  to  give  her  notes  of  hand  for  what  might  be  ad- 
vanced, and  for  the  value  of  the  stock,  crops,  and 
effects,  in  his  business.  He  appointed  his  wife  and  the 
trustees  before  alluded  to  his  executors.  After  his 
death,  his  widow  carried  on  the  business,  the  stock, 
crops,  and  effects  in  which  were  valued  at  1351 1.  5s.  Od. 
She  also  received  600 ?.  from  the  trustees  for  the  pur- 
pose of  enabling  her  to  carry  on  the  business,  and  for 
these  two  sums  she  gave  them  her  promissory  notes. 
She  also  became  indebted  to  the  estate  of  the  testator 
in  a  further  sum  of  768?.  12s.  4d.  She  then  became 
bankrupt,  and  an  attempt  was  made  to  prove  as  debts 
due  from  her  to  the  estate  of  tne  deceased,  the  three 
sums  of  1351?.  5s.  0d.,  600?.,  and  768?.  12s.  Ad.  But  it 
was  held  by  Lord  Eldon,  that  although  the  last  sum 
might,  the  two  first  could  not  be  proved  against  her 
estate;  for  they  represented  property  which  the  de- 
ceased had  authorised  to  be  embarked  in  trade,  and 
which  was  therefore  answerable  to  the  creditors  of  the 
trade  (b). 

(a)  lOVes.  110.  See,  also,  Ex  parte  Butterfield,  De  G.  570, 
and  other  cases  of  that  class,  noticed  hereafter  under  the  head 
Bankruptcy.  See,  also,  the  Irish  case,  Hall  v.  Fennell,  Ir.  Eep. 
9  Eq.  40G,  and  on  appeal,  ib.  615. 

{b)  See  for  other  illustrations  of  the.  same  doctrine,  Ex  parte 
Richardson.  Buck.  202  &  3  Mad.  138;  Thompson  p.  Andrews.  1 
M.  &  K.  116;  Cutbush  v.  Cutbush,  1  Bear.  184;  Scott  v.  Izon.  34 
Beav.  434.     In  this  last  case  it  was  attempted  to  make  an  execu- 


AS  REGARDS  JOINT  CREDITORS.  6S3 

*  It  follows  from  the  cases  cited  above  that   where  a  [  *  609] 
trust  fund  is  appropriated  to  carrying   on   a  business,  Bk.  IV. 
the   creditors  of  those  who  carry  it  on  are  better  off  £haP-  3- Sect- 

than   the   creditors  of  ordinary  partners,  inasmuch  as  Zl 

these  last  have  nothing  to  look  to  except  the  property 
of  the  partners  ;  whereas,  in  the  case  supposed,  the 
creditors  have  not  only  the  personal  security  of  the 
executors  and  trustees  who  carry  on  the  business,  but 
also  a  right  to  stand  in  their  place  to  the  extent  to  which 
they  are  entitled  to  indemnity  (c)  out  of  the  assets  of 
the  deceased. 

The  liability  of  the  estate  of  a    deceased  partner  to  Creditors 
persons  who  become  creditors  after  his  decease,  is  sub-  before  death 
ject  to  its  liability  to  those  who  were  his  creditors  at  his  Pr^"erred  to 
disease.      These  last  must  first  be  paid  ;  and  although,  creditors, 
as  in  such  a  case  as  Ex  parte  Garland,  they  might  not 
be  able  to  follow  the  assets  of  the  deceased  into  the 
hands  of  a  trustee  in  bankruptcy,  yet,  in  administering 
the  estate  of  a  person  whose  assets  have  been  employed 
in  trade  in   pursuance  of  directions  contained  in  his 
will,    the   creditors   who   have  become   such   since  his 
decease  cannot  compete  with  his  other  creditors  (d). 

It  has  at  various  times  been  contended  that   when   a  Amount  of 
testator  directs  a  trade  or  business  to  be  carried  on  after  estate  liable 
his  decease,  he  thereby  subjects   all  his  assets   to  the  where  assets 
payment  of  debts  incurred  in  the  course  of  carrying  it  ^be^on- 
on  ;  and  a  decision  by  Lord  Kenyon  (e)  has  been  sup-  tinned  in  the 
posed  to  warrant  such  contention.      It  is  now,  however,  business, 
clearly  settled,  that  the   extent  of  the   liability   of  the 
testator's  estate  does  not  exceed  the  amount  authorized 
by  him  to  be  employed  in  the  trade  or  business  directed 
by  him  to  be  carried  on  (/)  ;J  and  it  was  generally  ad- 
tor  responsible  for  not  having  proved,  but  the  attempt  failed, 
owing  mainly  to  lapse  of  time  and    the   impossibility  of  taking 
the  necessary  accounts. 

(c)  Be  Johnson,  15  Ch.  D.  548. 

(d)  See  Cutbush  v.  Cutbush,  1  Beav.  184. 

(e)  Hankey  v.  Hammock,  Buck.  210,  and  3  Madd.  148. 

(/)  See  the  cases  in  the  last  three  notes,  and  Strickland  r. 
Sviirons,  20  Ch.  D.  245  ;  Be  Johnson,  ib.  548  ;  Owen  v.  Delamere, 
15  Eq.  139  ;  McNeillie  r.  Acton,  4  De  G.  M.  &  G.  714 

Aitkin  v.  Pitkin,  7  Conn.  307  (1828);  Burwell  v.  Mandeville, 
2  How.  560  (1844);  Jones  v.  Walker,  103  U.  S.  444  (1880).  In 
Burwell  v.  Mandeville,  2  How.  560  (1844),  supra,  Story  J.,  says: 
"Nothing  but  the  most  clear  and  unambiguous  language,  demon- 
strating in  the  most  positive  manner  that  the  testator  intends  to 
make  his  general  assets  liable  for  all  debts  contracted  in  thecon- 
tinued  trade  after  his  death,  and  not  merely  to  limit  it  to  the 
funds  embarked  in  the  trade,  would  justify  the  court  in  arriving 
at  such  a  conclusion." 


684 


DEATH  AND  ITS  CONSEQUENCES. 


Bk.  IV. 
Chap.  3.  Sect. 
3. 

[  *  610] 

Effect  of 
general 
direction  to 
carry  on 
trade. 


mitted  that  the  decision  of  Lord  Kenyon  is   not  incon- 
sistent with  this  doctrine  (g). 

*  It  becomes  therefore  a  matter  of  considerable  im- 
portance, not  only  to  executors  but  to  creditors,  to  as- 
certain what  a  testator  who  directs  his  trade  or  business 
to  be  carried  on  has  authorised  to  be  employed  in  car- 
rying it  on.  This  must,  of  course,  depend  on  the  terms 
of  his  will  ;  but  it  has  been  held  that  a  general  direc- 
tion to  carry  on  a  business  in  which  the  testator  was 
engaged  at  the  time  of  his  death,  does  not  authorise 
the  employment,  for  the  purposes  of  that  business,  of 
more  of  his  assets  than  are  embarked  therein  when  he 
dies  (/*).  It  has  also  been  held,  that  a  bequest  by  a 
person  of  money  upon  trust  to  allow  it  to  remain  in  the 
concern  of  which  he  is  a  partner,  does  not  necessarily 
empower  the  trustees  to  trade  with  that  money  ;  for 
the  context  may  show  that  all  the  testator  meant  was 
that  the  sum  in  question  should  not  be  called  in,  but  be 
allowed  to  remain  outstanding  as  a  loan  to  the  surviv- 
ing partners  (i).  It  has  also  been  held  that  a  trust  to 
sell  a  business  is  not  for  this  purpose  equivalent  to  a 
trust  to  carry  it  on  until  sale  (k). 


Legatees, 
&c,  of 
deceased 

[*611] 


Section  III. — Consequences  as  Regards  the  Separate 
Creditors,  Legatees,  and  Next  of  Kin  of  the  De- 
ceased. 

In  considering  the  consequences  of  the  death  of  a 
partner  as  regards  his  separate  creditors,  and  his  lega- 
tees or  next  of  kin,  it  will  be  convenient,  first  of  all,  to 
examine  their  rights  under  ordinary  circumstances,  and 
then  to  advert  to  the  complicated  questions  which  arise 
when  the  assets  of  the  deceased,  instead  of  being  real- 
ised, are  allowed  by  his  executors  to  be  employed  in  the 
business  carried  on  by  the  firm  to  which  he  belonged, 
and  when  shares  are  specifically  bequeathed. 

1.   Rights  of  separate   creditors  and  legatees  generally. 

Under  ordinary  circumstances,  the  separate  creditors, 
legatees,  and  next  of  kin  of  a  deceased  partner  must 
look  for  *  payment  of  what  is  due  to  them  out  of  his 

(g)  See  the  ohservations  of  Turner,  L.  J.,  in  4  De  G.  M.  & 
G. 744. 

(,/t)  See  McNeillie  r.  Acton,  4  De  G.  M.  &.  G.  744,  where  fur- 
ther capital  was  required.     See,  also,  Re  Cameron,  26  Ch.  D.  18 

(i)  See  Travis*!.  Milne,  9  Ha.  141. 

(k)  Strickland  v.  Symons,  26  Ch.  D.  245,  ante,  p.  607. 


RIGHTS  OF  LEGATEES,  ETC.,  OF  THE  DECEASED.  685 

assets,  to  his  legal  personal  representative,  and  to  him  Bk.  IV. 
alone  (I).     The  executors  are,  under  ordinary  circum-  CnaP- 3.  Sect. 

stances,  the  only  persons  who  have  a  right  to  call  upon  _! __ 

the  surviving  partners  for  an  account ;  and  of  this  right  partner  most 
they  do  not  divest  themselves  by  a   sale   and  assign-  look  t0  nis 
ment  of  the  share   of  the  deceased  ;  for  the  effect   of  executor- 
such  sale  and  assignment  is  only  to  make  the  executors 
trustees  for  the  purchaser  (?n). 

A  leading  case  illustrating  the  doctrine  that  the  ex- 
ecutors of  a  deceased  partner  are,  under  ordinary  cir- 
cumstances, the  only  persons  entitled  to  require  an  ac- 
count from  the  surviving  partners,  is  Stainton  v.  The  stainton  v. 
Carron  Company  (n).1  There  a  bill  was  filed  by  the  The  Carron 
residuary  legatees  of  a  person  who  had  been  the  agent  Company. 
of  and  a  shareholder  in  a  company,  against  his  execu- 
tors and  other  persons  interested  in  the  will  of  the  de- 
ceased, and  against  the  company.  The  bill  charged 
that  the  executors,  as  agents,  managers  and  shareholders, 
had  interests  conflicting  with  their  duties  as  executors 
and  trustees;  and  the  bill  prayed  (amongst  other  things) 
that  the  company  mighl  transfer  the  testator's  shares 
to  his  executors,  and  that  an  account  might  be  taken  of 
what  was  due  from  the  company  to  his  estate,  and  for 
payment  to  the  executors  of  the  amount  to  be  found 
due.  The  company  and  one  of  the  executors  demurred, 
and  their  demurrers  were  allowed.  In  delivering  judg- 
ment the  Master  of  the  Kolls  thus  summed  up  the 
effect  of  the  cases  on  this  subject: — 

"The  persons  interested  in  the  estate  of  the  testator,  not  be- 
ing the  legal  personal  representatives,  will  not  be  allowed  to  sue 
persons  possessed  of  assets  belonging  to  the  testator,  unless  it  is 
satisfactorily  made  out  that  there  exist  assets  which  might  be  re- 
covered, and  which,  but  for  such  suit,  would  probably  be  lost  to 
the  estate."  And  again:  ilTo  support  such  a  bill  as  this  it  is 
not  sufficient  to  prove,  that  it  may  be  an  unpleasant  duty  to  the 
executors  and  trustees  to  take  the  necessary  steps  for  protecting 
the  property  entrusted  to  them.  It  is  not  sufficient  to  show  that 
it  will  be  for  their  interest  not  to  take  such  steps;  it  is  necessary 
to  show,  that  they  prefer  their  *  interest  to  their  duty,  and  that  I"  *  6 12] 

(/)  Alsager  v.  Rowley,  6  Ves.  748  ;  Saunders  v.  Druce.  3  Drew. 
140.  If  there  is  no  person  who  in  this  country  represents  the  de- 
ceased, a  representative  will  be  appointed.  See  Maclean  v.  Daw- 
son, 5  Jur.  N.  S.  1091. 

(m)  Clegg  v.  Fishwick,  1  Mac.  &  G.  294. 

(re)  18  Beav.  140. 

1  Harrison  v.  Righter,  11  N.  J.  Eq.  389  (1855);  Rosenzweig  v. 
Thompson,  06  Md.  593  (1881). 


686 


DEATH  AND  ITS  CONSEQUENCES. 


Bk.  IV.  they  intend  to  neglect  the  performance  of  the  obligation  inci- 

Chap.  3.  Sect,  clental  to  the  office  imposed  upon  them  by  the  testator,  and  which 
J they  have  undertaken  to  perform." 


Wilrul 

default. 


Taking 

partnership 

account  in 

action 

against 

executor 

alone. 


[*613] 


Cases  in 
which  the 
legatees,  &c, 
of  a  deceased 


The  executors,  it  may  be  observed,  have,  in  ordinary 
cases,  a  personal  interest  in  getting  in  the  assets  of  the 
deceased;  for,  if  they  wilfully  neglect  so  to  do,  they 
will  be  made  to  account  for  the  assets,  although  they 
may  not  actually  have  received  them  (o). 

It  must  not,  however,  be  supposed  that  in  an  action 
against  the  executor  of  a  deceased  partner  by  a  sepa- 
rate creditor,  legatee,  or  next  of  kin,  no  account  of  the 
deceased  partner's  share  in  the  partnership  can  be  or- 
dered or  taken;  for  it  is  the  common  course  in  such  an 
action  to  direct  an  inquiry  as  to  what  is  due  to  the  estate 
of  the  deceased  in  respect  of  such  share  (p).  Bat  in 
such  an  action  no  judgment  can  be  given  against  the 
surviving  partners  for  payment  of  what  is  due  on  the 
account;  the  executors  must,  if  necessary,  take  pro- 
ceedings against  them  to  obtain  such  payment  (q). 

It  seems  that,  under  an  ordinary  judgment  for  the 
administration  of  the  estate  of  a  deceased  partner,  the 
partnership  accounts  will  not  be  gone  into,  unless  the 
Court  specially  directs  some  inquiry  to  be  made  with 
reference  to  the  share  of  the  deceased  (?*).  But  it  is 
difficult  to  see  how  any  account  of  his  personal  estate 
can  be  taken  without  such  an  inquiry;  and  it  has  been 
decided  more  than  once,  that  if  the  surviving  partners 
seek  to  obtain  payment  of  a  balance  from  the  estate  of 
the  deceased  on  the  partnership  accounts,  these  ac- 
counts must  be  taken,  although  no  special  direction  as 
to  them  may  be  contained  in  the  judgment  (s).  The 
costs  of  an  *  administration  action  brought  by  a  sepa- 
rate creditor  are  paid  in  priority  to  joint  creditors  (t). 

Notwithstanding,  however,  the  general  rale  that  the 
separate  creditors,  legatees,  or  next  of  kin  of  a  deceased 
partner  have  no  locus  standi  against  the  surviving  part- 

(o)  See,  as  to  charging  the  executor  of  a  partner  with  wilful 
default,  Grayburn  v.  Clarkson,  3  Ch.  605;  Sculthorpe  v.  Tipper, 
13  Eq.  232;  Ward  v.  Ward,  2  H.  L.  C.  777,  and  Rowley  v.  Adams, 
ib.  726,  and  7  Beav.  395;  Kirkman  v.  Booth,  11  Beav.  273. 

(p)  As  in  MacDonald  v.  Richardson,  1  Giff.  81.  See.  also, 
Pointon  v.  Pointon,  12  Eq.  547,  where  the  only  surviving  part- 
ner was  an  executor  arid  trustee. 

(q)  Ord.  xvi.  r.  48,  &c,  and  Ord.  xviii.  do  not  apparently  ap- 
ply to  such  a  case. 

(/■)  See  the  next  note. 

(s)  See  Paynter  r.  Houston,  3  Mer.  297;  Baker  v.  Martin,  5 
Sim.  380:  Woolley  v.  Gordon,  Taml.  11. 

(t)  Re  McRea,  32  Ch.  D.  613. 


RIGHTS  OF  LEGATEES,  ETC.,  OF  THE  DECEASED.  6S7 


ners,  this  rule  is  by  no  means  without  its  exceptions.  Bk.  TV 

3 


Indeed  there  are  cases  to  be  met  with,  which   appa-  £haP-  3 


rently  warrant  the   inference,  that   surviving  partners 

may  alwavs  be  sued  along  with  the  executor  or  admin-  partner  have 

istrator   of   the   deceased    (u).     But   the   authority  0f  a  right  to  an 

i  *\  ('count 

these  cases  has  recently  been   called   in  question,  and  }rom  tile 

the  better  opinion  now  is  that  some  special  circum-  surviving 
stances  are  necessary  to  justify  such  a  course  (x).  The  partners, 
special  circumstances  which  have  been  held  sufficient 
are,  collusion  between  the  executors  and  the  surviving 
partners  (y);  refusal  by  the  former  to  compel  the  lat- 
ter to  come  to  an  account  (2);  dealings  which  may 
have  precluded  the  executors  from  themselves  obtain- 
ing any  account  (a);  the  fact  that  the  executors  are 
themselves  partners  and  liable  therefore  to  account  as 
partners  to  themselves  as  executors  (6);  and  generally, 
where  the  relation  between  the  executors  and  the  sur- 
viving partners  is  such  as  to  present  a  substantial  im- 
pediment to  the  prosecution,  by  the  executors,  of  the 
rights  of  the  persons  interested  in  the  estate  of  the  de- 
ceased, against  the  surviving  partners,  there  it  has  been 
said,  an  action  may  be  instituted  by  those  persons 
against  the  executors  and  the  surviving  partners  (c). 

If  the  surviving  partners  and  the  executors  are  dif-  Accounts 
ferent  *  persons,  and  they  have  bond  fide  come  to  an  [  *  614] 
account  respecting  the  partnership    affairs,  and   have  settled 

settled  such  account  as  a  final  account,  the  account  thus  *  "een  s"r" 
.,,.,.,.  ,    .  ,         '     .  .  vivmg  part- 

settled  is  binding,  as  between  the  surviving  partners  ners  amj  tjie 

and  the  persons  interested  in  the  estate  of  the  deceased  executors  of 

partner,  and  cannot  be  impeached,  save  on  the  ground  a  deceased 

of  fraud  (d).  partner- 

(m)  See  Newland  v.  Champion,  1  Ves.  S.  106,  and  2  Coll.  46  ; 
Bowsher  v.  Watkins,  1  R.  &  M.  277. 

(a;)  See  Yeatrnan  v.  Yeatman,  7  Ch.  D.  210  ;  Davies  ».  Davies, 
2  Kenn,  534  ;  Law  r.  Law,  2  Coll.  41  ;  Travis  v.  Milne,  9  Ha. 
141 ;  Stainton  v.  The  Carron  Co.,  18  Beav.  146. 

(y)  Doran  v.  Simpson,  4  Ves.  651  ;  Gedge  v.  Traill,  1  R.  &  M. 
281,  note  ;  Alsager  v.  Rowley.  6  Ves.  74H. 

(z)  Burroughs  v.  Elton,  11  Ves.  29;  the  prayer  of  the  bill  in 
this  case  may  be  usefully  referred  to,  but  see  Yeatman  v.  Yeat- 
man, 7  Ch.  D.  210,  where  refusal  was  held  not  to  be  a  sufficient 
ground. 

(«)  Law  v.  Law,  2  Coll.  41,  and  on  appeal,  11  Jur.  463  ;  Braith- 
waite  v.  Britain,  1  Keen,  206. 

(b)  Beningfield  v.  Baxter,  12  App.  Ca.  167  ;  Cropper  v.  Knap- 
man,  2  Y.  &  C.  Ex.  338  ;  Travis  0.  Milne,  9  Ha.  141  ;  and  see  as 
to  continuing  the  deceased's  assets  in  the  business,  pout,  p.  614. 

(c)  Travis  r.  Milne,  9  Ha.  150.  As  to  discovery  by  the  sur- 
viving partners,  see  Leigh  v.  Birch.  32 Beav.  399,  andOrd.  xxxi.  r.  7. 

(d)  Davies  v.  Davies.  2  Keen,  534  ;  Smith  v.  Everett,  27  Beav. 
446.     See  the  Conveyancing  Act,  1881,  \  37. 


688 


DEATH  AND  ITS  CONSEQUENCES. 


Bk.  IV. 
Chap.  3.  Sect. 
3. 

Where 
executors 
are  person- 
ally inter- 
ested. 


Wedderburn 
v.  Wedder- 
burn. 


But  arrangements  made  between  executors  and  sur- 
viving partners  for  the  benefit  of  the  executors  indi- 
vidually are  always  liable  to  suspicion;  and  if  the  ex- 
ecutors are  themselves  the  surviving  partners,  or  some 
of  them,  it  becomes  exceedingly  difficult  to  make  any 
arrangement  which  will  be  binding  on  the  persons  in- 
terested in  the  estate  of  the  deceased;  for  even  if  any 
arrangement  is  assented  to  by  such  persons,  it  will  be 
liable  to  be  successfully  disputed,  on  any  of  those  nu- 
merous grounds  which  are  held  to  invalidate  arrange- 
ments between  trustees  and  their  ceshtis  que  trustent, 
and  by  which  trustees  do,  or  may,  obtain  a  benefit  at 
the  expense  of  the  trust  estate.  A  remarkable  instance 
of  this  is  afforded  by  the  case  of  Wedderburn  v.  Wed- 
derburn  (e),  where  an  account  of  a  deceased  partner's 
estate  was  directed,  at  the  suit  of  the  persons  benefi- 
cially interested  therein,  although  thirty  years  had 
elapsed  since  his  death,  and  several  changes  had  taken 
place  in  the  firm,  and  releases  had  been  given  to  the 
executors  by  their  cestuis  que  trustent  (/). 


2.  Rights  of  separate  creditors  and  legatees  when  the 
share  of  the  deceased  is  not  got  in 

Rights  of  Executors,  unless  authorized  by  their  testator  so  to 

legatees,  &c,  do,  ought  not  to  leave  his  assets  outstanding  in  the 
when  the        trade  or  business   in  which   he  was   engaged  when   he 
deceased         died.     It  has  been  laid  down  as  a  rule  without  excep- 
partner  are     tion,  that  to   authorise   executors   to  carry  on  a  trade, 
continued  in  or  to  permit  it  to  be  carried  on  with  the  property  of  a 
r11*  ai  k^688'  t^tator  held  by  them  in  trust,  there  *  ought  to  be  the 
L     uioj        most  distinct  and  positive  authority  and  direction  given 
by  the  testator  for  that  purpose  (g)1.     A  bequest  of  his 
share  and  interest  in  tbe  partnership  to  one  person  for 
life,  and  then  to  another,  does  not,  without  more,  war- 
rant the  trustees  of  his  will  in  keeping  such  share  and 
interest  unconverted  into  money  ;  and  it  is  therefore 


{e)  2  Keen,  722,  and  4  M.  &  Cr.  41,  noticed  ante,  p.  533. 

(/)  See  Beningtield  v.  Baxter,  12  App.  Ca.  167,  and  the  other 
cases  as  to  profits  accruing  since  death,  ante,  p.  528. 

(g)  Kirkman  v.  Booth,  11  Beav.  273.  A  power  to  executors 
named  in  a  will  to  carry  on  a  business  does  not  justify  an  ad- 
ministrator in  so  doing  if  all  the  executors  renounce.  Lambert 
v.  Rendle,  3  New  R.  247. 


1  Watkinson  v.  Fakes,  5  Heisk.  185  (1871);  McKean  v.  Vick, 
108,  111.  373  (1884). 


RIGHTS  OF  LEGATEES,  ETC.,  OF  THE  DECEASED.  6S9 

their  duty  to  realise  it,  and  invest  what  they  receive  for  Bk.  IV. 
the  benefit  of  the  legatees  (h).1  Chap.  3. 

•         •  •  Sect    "3 

If  a  testator's  capital  is  left  in  the  business  as  a  loan 


to  the  surviving  partners,  they  are  only  liable  to  pay  Option  be- 
interest  on  it,  even  although  they  do  not  pay  it  off tweea  in" 
when  they  ought  (i)  ;  but  where  an  executor  improperly  p^^g 
employs  the  assets  of  the  testator  in  a  business  carried 
on  by  himself,  he  is  chargeable,  at  the  option  of  the 
persons  beneficially  interested  in  the  estate  of  the  de- 
ceased, either  with  the  sum  employed  and  interest  there- 
on at  5Z.  per  cent.,  or  with  the  sum  employed  and  the 
profits  made  by  its  employment  (k).  And  such  per- 
sons are  not  deprived  of  this  option  by  the  circum- 
stance that  it  will  be  difficult  and  expensive  to  ascer- 
tain  what  part  of  the  profits  has  arisen  from  the  em- 
ployment of  the  assets  of  the  deceased  ;  for  whatever 
difficulty  may  exist  is  attributable  to  the  conduct  of  the 
executor  himself,  and  cannot  therefore  be  effectually 
urged  by  him  as  a  reason  why  no  account  of  profits 
should  be  taken  (I).  The  cestuis  que  trustent  are 
moreover  entitled  to  compound  interest  if  the  duty  of 
the  executors  is  to  call  in  their  testator's  capital,  and 
invest  it  and  accumulate  the  income  (m)-,  but  they  are 
not  entitled  to  profits  for  part  of  the  time  and  to  inter- 
est for  *the  rest,  unless  there  has  been  some  intervening  [  *  616] 
settlement  of  account  (»■),  or  other  special  circum- 
stance (o). 

It  follows  from  the  doctrine   above  stated,  and  from  profits  made 
the  principles  which  were  explained  when  treating  of  since  death, 
judgments  for  an  account  (p),  that  if  one  of  two  part- 
ners makes  the  other  his  executor,  and  dies,  the  surviv- 
ing partner  must,  under  ordinary  circumstances,  not 
only  account  to  the   estate  of  the   deceased  for  what 


(li)  Re  Chancellor,  26  Ch.  D.  42  ;  Kirkman  r.  Booth,  11  Beav. 
273.  See  Skirving  v.  Williams,  24  ib.  275,  and  as  to  specific 
legacies  of  shares,  infra,  p.  619. 

(t)  See  Vyse  v.  Foster,  L.  R.  7  H.  L.  318,  and  8  Ch.  300,  no- 
ticed  ante,  p.  534,  and  see  infra. 

{k)  See  Docker  v.  Somes,  2  M.  &  K.  655  ;  Palmer  v.  Mitchell, 
ib.  672,  note ;  Heathcote  v.  Hulme,  I  J.  &  W.  122. 

(I)  Docker  «.  Somes,  2  M.  &  K.  655  ;  Townend  v.  Townend,  1 
Giff.  201  ;  Flockton  v.  Bunning.  8  Ch.  323.  note,  ante,  p.  530, 

(m)  See  Jones  v.  Foxall,  15  Beav.  388  ;  Williams  v.  Powell,  ib. 
461.  Possibly,  also,  in  some  other  cases.  See  the  observations 
in  Vyes  v.  Foster,  L.  R.  7  H.  L.  346. 

(n)  Heathcote  v.  Hulme,  1  J.  &  W.  122. 

(o)  As  in  Townend  v.  Townend,  1  Giff.  201,  noticed  ante,  p.  528. 

(jj)  Ante,  p.  516  et  seq. 

1  Wood's  Estate,  1  Ashm.  (Pa.)  319  (1827);  Lucht  v.  Behrens, 
28  Oh.  St.  231  (1876). 

*  21    LAW  OF   PARTNERSHIP. 


690  DEATH  AND  ITS  CONSEQUENCES. 


Ek.  IV.  may  be  due,  in   respect  of  the  testator's   shai'e  in  the 

Chap.  3.  partnership  at  his  death  (q),  but  also   for  the  profits 

'    made  by  him  since  his  death,  by  the  employment  of  his 

capital  in  the  business  carried  on  by  the  late  firm  (r). 
Moreover  it  is  immaterial  whether  such  business  has 
be§n  continued  by  the  surviving  partner  alone,  or  by 
him  and  others  in  partnership  with  him  ;  for  the  obli- 
gation of  the  executor  thus  to  account,  is  founded  on  a 
breach  of  trust  committed  by  him,  for  which  he  is  liable 
at  all  events  to  the  extent  to  which  he  has  benefited  by 
it,  whether  other  persons  are  also  liable  or  not  ;  and 
being  founded  on  a  breach  of  trust,  an  action  in  respect 
of  it  may  be  sustained  against  the  executor  alone, 
though  he  may  only  be  one  of  several,  by  whom  the 
profits  have  been  made  (s). 

The  cases  illustrating  the  right  of  legatees  to  an  ac- 
count of  profits  made  since  their  testator's  death  where 
the  executors  have  continued  his  assets  in  the  business 
in  which  he  was  a  partner  have  been  already  adverted 
to  at  considerable  length  (t).  The  following  classified 
list  of  them  is  inserted  here  for  reference. 

1.  Account  of  subsequent  profits  decreed. 

A.   Executors  against  surviving  partners. 

Yates  v.  Finn,  13  Ch.  D.  839  {ante,  p.  527.) 
Brown  v.  De  Tastet,  Jac.  284  {ante  p.  527.) 
Sooth  v.  Parks,  1  Moll.  465,  and  Beatty,  444. 
Featherstorihaugh  v.  Turner,  25  Beav.  382. 
Smith  v.  Everett,  27  Bea\\  446. 

f  *  617]         *  B.  Legatees  against  executors  who  were   not  part- 
ners, but  who  continued  his  assets  in  business. 

Heaihcote  v.  Huhne,  1  J.  &  W.  122. 
Docker  v.  Somes,  2  M.  &  K.  654. 
Palmer  v.  Mitchell,  2  M.  &  K.  672,  note. 

C.  Legatees  against  executors  who  were  surviving 
partners  or  who  became  partners. 

Cook  v.  Collingridge,  Jac.  607  {ante,  p.  528). 

Stocken  v.  Dawson,  9  Beav.  239,  and  on  appeal,  27  L.  J. 

Ch.  282. 
Wedderbum  v.  Wedderburn,  2  Keen,   722,  and  4  M.   & 

Cr.  41  {ante,  p.  533). 

{q)  See  the  cases  cited,  infra,  pp.  616,  617. 
(r)  Phillips  v.  Phillips,  Finch,  410. 
(s)  See  ante,  p.  523. 
(t)  Ante,  p.  521  ct  seq. 


RIGHTS  OF  LEGATEES,  ETC.,  OF  THE  DECEASED.  601 


Toicnend  v.  Tovmend.,  1  Giff.  201  (ante,  p.  528).  Bk.  TV. 

Macdonald  v.  Richardson,  1  Giff.  81  (ante,  p.  530).  Chap.  3.  Sect. 

WiUett  v.  Blanford,  1  Ha.  253   (ante,   p.  525).      In  this  ^ 

case  accounts  of  subsequent  profits  were  directed  with- 
out prejudice  to  any  question. 

Flocton  v.  Bunning,  8  Ch.  324,  note  (ante,  p.  530). 

2.  Accoimf  o/  subsequent  profits  refused. 

A.  Executor  against  surviving  partner. 

Knox  v.  G#e,  L.  R.  5  H.   L.  656,  the  statute  of  limita- 
tations  being  a  baf. 

B.  Legatee  against  executors,  one  of  whom  was  a 
surviving  partner,  and  the  other  of  whom  had  become 
a  partner. 

Simpson  v.  Chapman,  4  De  G.  M.  &  G.  154  (ante,  p.  532). 
Vyse  v.  Foster,  L.  R.  7  H.  L.  318,  and  8  Ch.   300   (ante, 

p.  534). 
See,  also,  Wedderburn  v.  Wedderburn,  22  Beav.  84,  and 

WiUett  v.  Blanford,  1  Ha.  253  (ante,  pp.  533  and  525). 

Upon  the  principle   that  every  one  concerned   in  a  Liability  of 
breach  of  trust  with  notice  of  the  trust  is  answerable  for  surviving 
such  breach,  it  follows  that  if  a  partner  dies,   and  his  Part?e.rs  for 
surviving  partners  allow  his  assets   to  remain   in  their  properly  con- 
business,  with  the  knowledge  that  to  suffer  them  so  to  tinned  in 
remain  is  a  breach  of  trust  on  the  part  of  the  executors,  tne  lu,si~ 
the  surviving  partners  will  be  themselves  responsible  to  ness' 
the  separate  creditors,  legatees,  or  next  of  kin   of  the 
deceased,  for  any   loss    which    may    be   thereby    sus- 
tained  (u).  *  And  further,  inasmuch  as   it  is,  primd  [*618]  • 
facie,  a  breach  of  trust  for  executors  to  allow  the  assets 
of  the  deceased  to  remain  in  the  business  carried  on  by 
him   at  his  death,  surviving  partners  who  knowingly 
carry  on  the  business  with  assets  of  the  deceased  thus 
left  in  their  hands  will  be  answerable   for  such   assets, 
unless  they  can  show  that  no  breach  of  trust  was  in  fact 
committed  (x).     Their  liability  to  account  for  profits 
has  already  been  considered  (y). 

Where,  however,  the  surviving  partners   and  the  ex-  Loans  by 
ecutors  are  different   persons,  and  the  executors  dis-  executors. 

(«)  See  Wilson  v.  Moore,  1  M.  &  K.  127  and  337  ;  Booth  v. 
Booth,  1  Beav.  125,  and  compare  Ex  parte  Barnewell,  6  De  G. 
M.  &  G.  801. 

(x)  Travis  v.  Milne,  9  Ha.  141. 

[y)  Flocton  v.  Bunning,  ante,  p.  530. 


GS2  DEATH  AND  ITS  CONSEQUENCES. 


Bk.  IV.  tinctly  lend  part  of  their  testator's  assets  to  his  surviv- 

Chap.  3.  Sect.  jQg  partners,  tbe  latter  are  only  liable  to  pay  interest 

1 for  it,  at  the  rate  agreed  upon  with  the  executors.     In 

such  a  case  the  legatees  are  not  entitled  to  a  share  of 
the  profits  made  by  means  of  the  money  lent,  although 
in  lending  it  the  executors  may  have  been  guilty  of  a 
breach  of  trust,  and  the  borrowers  may  have  known 
that  the  money  belonged  to  the  deceased  (z).  A  fortoiri, 
if  the  executors  are  authorised  to  lend  part  of  the  assets 
of  the  deceased  to  his  surviving  partners,  they  will  not 
be  accountable  for  the  profits  they  may  make  by  the 
employment  in  their  trade  of  money  lent  to  them  by 
the  executors  in  pursuance  of  their  authority  (a)  :  nor, 
in  such  a  case  as  is  now  supposed,  will  the  executors 
be  responsible  for  the  money  if  lost,  if  they  took  such 
security  for  its  repayment  as,  having  regard  to  the  will 
of  the  testator,  it  was  their  duty  to  take  (6). 
Executor  be-  It  sometimes  happens  that  the  executor  of  a  deceased 
coming  a  partner  is  taken  into  partnership  by  the  surviving  part- 
partner.  ners,  and  a  question  then  arises  whether  the  profits  re- 

ceived by  the  executor  as  partner  belong  to  him  per- 
sonally, or  to  the  estate  which  he  represents.  This 
must  depend  on  the  circumstances  under  which  the  ex- 
[  *  619]  ecutor  became  a  partner.  If  he  became  a  partner  *  in 
his  representative  character,  or  as  in  Cook  v.  Colling- 
ridge  (c),  under  circumstances  entitling  the  legatees  to 
treat  him  still  as  their  trustee,  he  must  account  for  any 
profits  which  he  may  have  obtained  as  a  partner.  On 
the  other  hand,  if,  as  in  Simpson  v.  Chapman  (d),  he 
became  a  partner  not  in  his  representative  character, 
nor  under  such  circumstances  as  those  above  mentioned, 
the  profits  accruing  to  him  as  a  partner  will  be  his  own, 
and  not  form  part  of  the  assets  for  which  he  must  ac- 
count as  executor. 

3.   Specific  bequests  of  shares. 

Legacy  of  a         A  specific  bequest  by  a  partner  of  his  share  in  the 

share  in  a       partnership  clearly  does  not  entitle  the  legatee  to  be- 

partnersnip.    come  a  partner  himself  unless  there  is  some  agreement 

to  that  effect    binding  upon  the  surviving  partners. 

(z)  See  Stroud  v.  Gwver,  28  Beav.  130  ;  Flocton  v.  Bunning,  8 
Ch.  323,  note,  and  ante,  p.  530  ;  44  &  45  Vict.  c.  41,  £  37. 

(a)  Parker  v.  Bloxhani,  20  Beav.  295  ;  Vyse  v.  Foster,  L.  R.  7 
H.  L.  318,  and  8  Ch.  300,  ante,  p.  534,  where  the  testator's  capi- 
tal was  not  got  in  at  the  time  appointed,  and  one  oi*  the  execu- 
tors was  a  surviving  partner. 

(b)  Paddou  v.  Richardson,  7  De  G.  M.  &  G.  563. 

(c)  Jac.  607,  ante,  p.  528. 

(d)  4  De  G.  M.  &  G.  154,  ante,  p,  532. 


RIGHTS  OF  LEGATEES,  ETC.,  OF  THE  DECEASED.  CDS 

The  right  of  the  legatee  is  simply  to  be  paid  the  amount  Bk.  IV. 
due  to  the  testator  at  the  time  of  his  death  in  respect  Chap.  3. 
of  his  share  (e);  and  also,  under  the  circumstances  and  '  ec  "  "" 


subject  to  the  qualifications  already  noticed  (/),  to  re- 
ceive a  proportion  of  the  profits  made  since  the  testa- 
tor's death.  As  between  the  legatee,  however,  and  the 
executor,  the  legatee  is  entitled  to  have  the  share  kept 
in  the  business,  subject  only  to  the  superior  right  of 
the  executor  to  sell  the  testator's  personal  estate  for 
the  payment  of  debts  (g). 

A  bequest  of  a  partner's  capital  has  been  held  to  in- 
clude what  was  due  to  him  in  respect  of  advances  (h). 

It  has  been  held  that  the  legatee  of  a  deceased  part-  Legatee  of 
ner's  share  in  the  good  will  of  the  partnership  business  good-will, 
could  not  sue  the  surviving  partners  for  a  sale  of  the 
good-will  and  payment  of  his  share,  although  the  be- 
quest had  been  assented  to  by  the  executors  (i).     This 
case  was  somewhat  peculiar,  as  in  *  truth  the  surviving  ["  *  620] 
partner  was  entitled  to  everything  which  gave  a  sale- 
able value  to  the  good- will  (k). 

A  specific  bequest  of  a  share  in  a  partnership  will  be  Ademption 
adeemed  if  the  testator,  after  he  has  made  his  will,  of  legacies  of 
leaves  the  firm  and  receives  his  share;  but  so  long  as  shares. 
he  remains  a  partner,  there  will  be  no  ademption,  al- 
though by  some  agreement  subsequent  to  the  date  of 
the  will,   the  amount  of    his    share    may    have  been 
varied  (I).     Even  where  he  has,  since  he  made  his  will, 
acquired  the  whole  business,  his  will  may  include  the 
whole  (m). 

A  legatee  is  not  entitled  to  receive,  out  of  the  estate  Legacv  to 
of  his  testator,  any  part  of  the  bounty  intended  for  him  partner  in- 
by  the  testator,  until  the  legatee  has  paid  all  his  own  debted  to 
obligations  in  the  shape  of  debts  owing  to  the  testa-  testator- 
tor's  estate.     This  principle  is   strongly  illustrated  by 
Smith  v.  Smith  (n).     There  a  father  who  had  advanced  Smith  v. 
money  to  a  firm  in  which  his  sod   was  a  partner,  died,  Smith, 
having  bequeathed  part  of  his  residuary  estate  to  the 
son.     The  father's  executors  were  held  entitled  to  re- 

(c)  Farquhar  v.  Haddon,  7  Ch.  1. 

(/)  Ante,  p.  616. 

(g)  See  Fryer  v.  Ward,  31  Beav.  602,  where  the  legatee  had 
an  option. 

(/<)  Bevan  v.  A.-G.,  4  Giff.  361.  A  bequest  of  the  use  of  capi- 
tal employed  in  trade  gives  an  absolute  interest  in  it,  see  Terry 
v.  Terry,  33  Beav.  232. 

(t)  Robertson  v.  Quiddington,  28  Beav.  529. 

(k)  See  on  this  subject,  ante,  p.  439. 

(/)  Backwell  v.  Child,  Amb.  260;  Ellis©.  Walker,  ib.  309. 

(m)  Be  Russell,  19  Ch.  D.  432. 

(n)  3  Giff.  263. 


694 


DEATH  AND  ITS  CONSEQUENCES. 


Bk.  IV. 
Chap.  3.  Sect, 
3. 


Rights  of 
tenant  tor 
life. 


Rights  to 
profits,  &c. 

[*621] 


Apportion- 
ment of 
profits. 


tain  the  whole  amount  of  the  partnership  debt  out  of 
the  son's  share  of  the  residue,  althongh  the  debt  was 
barred  by  the  statute  of  limitations  when  the  father  died. 

When  a  share  in  a  partnership  is  bequeathed  or  set- 
tled in  trust  for  one  person  for  life  and  afterwards  to 
another,  the  first  question  which  arises  is,  whether  the 
tenant  for  life  is  entitled  to  have  the  share  kept  uncon- 
verted, or  whether  it  ought  to  be  converted  into  money, 
and  invested  pursuant  to  the  well-known  doctrine  laid 
down  in  Hoive  v.  Lord  Dartmouth  (o).  This,  of  course, 
depends  on  the  terms  of  the  will;  but  its  language 
must  be  clear  to  entitle  the  tenant  for  life  to  have  the 
share  kept  unconverted  (p). 

A  specific  legatee  of  a  share  in  a  partnership  is  enti- 
tled to  all  ordinary  profits  declared  after  the  testator's 
death  (q);  *  unless  although  declared  after  his  death 
they  were  earned  and  ought  to  have  been  declared  be- 
fore (r).  But  profits  declared  before  a  testator's 
death  (s),  or  declared  afterwards  when  they  were  earn- 
ed and  ought  to  have  been  declared  before  (t),  prima 
facie  form  part  of  his  general  estate,  and  do  not  pass 
to  the  specific  legatee  of  the  share:  and  the  same  rule 
applies  to  dividends  declared  before  his  death,  but  the 
actual  payment  of  which  is  postponed  until  after- 
wards (u).  Losses  must  not  be  thrown  on  capital  so 
as  to  benefit  a  tenant  for  life  at  the  expense  of  the  re- 
mainderman (x). 

The  profits  of  an  ordinary  partnership  are  not  with- 
in the  Apportionment  act,  1870,  33  &  34  Yict.  c.  35  (y), 
although  dividends  of  companies  are  within  it  (z). 

.  (o)  7  Ves.  137,  and  2  Wh.  &  Tud.  L.  C;  Dimes  v.  Scott,  4 
Russ.  195. 

(p)  See  Be  Chancellor,  26  Ch.  D.  42,  and  ante,  p.  615,  note 
(h).     See.  also,  Be  Cameron,  ib.  19. 

(q)  Jacques  v.  Chambers.  2  Coll.  435;  Wright  v.  Warren,  4  De 
G.  &  S.  367;  Browne  v.  Collins,  12  Eq.  586;  Ibbotson  v.  Elam,  1 
Eq .  188. 

(r)  Browne  v.  Collins,  12  Eq.  586.  But  see  Ibbotson  v.  Elam, 
1  Eq.  188. 

(s)  See  the  next  two  notes. 

(t)  Browne  v.  Collins.  12  Eq.  586. 

(«)  De  Gendre  v.  Kent,  4  Eq.  283;  Lock  v.  Venables.  27  Beav. 
598:  Wright  v.  Tuckett,  1  J.  &  H.  266.  Compare  Clive  v.  Clive, 
Kay,  600,  which  turned  on  the  special  wording  of  the  company's 
deed  of  settlement.  See  as  to  bonuses,  Bouch  v.  Sproule,  12 
App.  Ca.  385,  reversing  29  Ch.  D.  635. 

(x)  See  Upton  v.  Brown,  26  Ch.  D.  588;  Gow  v.  Forster,  ib. 
672. 

(?/)  Be  Cox's  Trusts,  9  Ch.  D.  159;  Jones  v.  Ogle,  8  Ch.  192. 
See  before  the  Act,  Ibbotson  v.  Elam,  1  Eq.  188;  Browne  v.  Col- 
lins, 12  Eq.  586;  Johnston  v.  Moore,  27  L.  J.  Ch.  D.  453. 

(z)  Be  Griffith,  12  Ch.  D.  655. 


■*& 


BANKRUPTCY.  695 


*  CHAPTER  IT.  [*622] 

OF  BANKRUPTCY. 

Preliminary  Observations. 

Partners  may  become  bankrupt,  either  individually  Bk.  IV. 
or  collectively,  and  in  some  respects  a  division  of  the  Chap.  4. 
present  branch  of  the  law  into  two  parts,  relating,  the  Bankruptcy 
one  to  the  bankruptcy  of  an  individual  partner,  and  the  of  partners 
other  to  the  bankruptcy  of  a  firm,  would  be  as  conveni-  atui  partner- 
ent  as  it  would  be  simple.    But  the  causes  and  consequen-  sniPs- 
ces  of  the  bankruptcy  of  an  individual  partner,  and  the 
causes  and  consequences  of  the  bankruptcy  of  a  firm  of 
partners,  are  in  so  many  respects  the  same,  that  to  con- 
sider them  twice  over  would  lead  to  useless  repetition. 
With  a  view  to  avoid  this,  it  is  proposed  in  the  present 
chapter  to  treat  of  the  bankruptcy  of  partners  and  part- 
nerships under  heads  applicable  to  both,  and  to  point 
out  under  each  head  those  differences  between  the  two 
which  are  of  practical  importance. 

The  present  law  of  bankruptcy  is  based  on  the  Bank-  Present 
ruptcy  act,  1883  (46  &  47  Yict.   c.  52),  and  the  rules  bankruptcy 
and  orders  of   Oct.   1886,   promulgated  under  its  au-  law 
thority.     The  act  does  not  extend  to  Scotland  or  Ire- 
land  except  where  expressly    provided    (a)     All    the 
older  bankruptcy  acts  are  repealed  (b),  and  a  new  sys- 
tem of  law  has  been  substituted  for  them,  based  on  the 
pre-existing  law.  and  to   a  great  extent  preserving  its 
principles  and  the   practice  under  it  (c);  but   at  the 
same  time  modifying  it  in  many  important  respects,  and 
rendering  it  *  necessary  in  all  cases  to  examine  the  new  [  *623] 
enactments  before  relying  on  earlier  decisions  (d). 

The  statute  does  not  apply  to  incorporated  compa- 
nies (§  123)  ;  but  it  does  to  unincorporated  companies 
empowered  to  sue  and  be  sued  by  public  officers  (e). 

(a)  46  &  47  Vict.  c.  52,  \  2. 

(b)  Ibid.  \  169. 

(c)  Bank.  Rules,  1886,  r.  353. 

(d)  See  Ex  parte  Griffith.  23  Ch.  D.  69. 
(Y.  See  Bank.  Rules,  1886,  r.  258. 


696 


BANKRUPTCY. 


Bk.  IV. 

Chap.  4. 


Proceedings 
in  partner- 
ship name. 


Attestation 
of  firm 
signature. 


Service  on 
firm. 


Debtors' 
petition  by 
firm. 


Receiving 
order  against 
firm. 

Statement 
of  affairs. 

Adjudica- 
tion against 
partners. 


Firms  may  proceed  and  be  proceeded  agr.inst  in  their 
mercantile  names  ;  but  this  rule  does  not  apply  to  ad- 
judications of  bankruptcy  (  f ). 

The  statute  enacts  : — 

\  115.  Any  two  or  more  persons,  being  partners,  or  any  person 
carrying  on  business  under  a  partnership  name,  may  take  pro- 
ceedings or  be  proceeded  against  under  this  Act  in  the  name  of 
the  firm,  but  in  such  case  the  Court  may,  on  application  by  any 
person  interested,  order  the  names  of  the  persons  who  are  part- 
ners in  such  firm  or  the  name  of  such  person  to  be  disclosed  in 
such  manner,  and  verified  on  oath,  or  otherwise  as  the  Court  may 
direct  (g). 

And  the  Bankruptcy  Eules  1886,  contain  the  follow- 
ing further  provisions  on  this  subject  : 

259.  Where  any  notice,  declaration,  petition,  or  other  document 
requiring  attestation  is  signed  by  a  firm  of  creditors  or  debtors  in 
the  firm  name,  the  partner  signing  for  the  firm  shall  add  also  his 
own  signature,  e.  g.  "  Brown  &  Co.  by  James  Green,  a  partner  in 
the  said  firm." 

260.  Any  notice  or  petition  for  which  personal  service  is  neces- 
sary shall  be  deemed  to  be  duly  served  on  all  the  members  of  a 
firm  if  it  is  served,  at  the  principal  place  of  business  of  the  firm 
in  England,  on  any  one  of  the  partners,  or  upon  any  person  hav- 
ing at  the  time  of  service  the  control  or  management  of  the  part- 
nership business  there. 

261.  Where  a  firm  of  debtors  file  a  declaration  of  inability  to 
pay  their  debts  or  bankruptcy  petition  the  same  shall  contain  the 
names  in  full  of  the  individual  partners,  and  if  such  declaration 
or  petition  is  signed  in  the  firm  name  the  declaration  or  petition 
shall  be  accompanied  by  an  affidavit  made  by  the  partner  who 
signs  the  declaration  or  petition,  showing  that  all  the  partners 
concur  in  the  filing  of  the  same. 

262.  A  receiving  order  made  against  a  firm  shall  operate  as  if 
it  were  a  receiving  order  made  against  each  of  the  persons  who 
at  the  date  of  the  order  is  a  partner  in  that  firm. 

263.  In  cases  of  partnership  the  debtors  shall  submit  a  state- 
ment of  their  partnership  aftairs,  and  each  debtor  shall  submit  a 
statement  of  his  separate  affairs. 

264.  No  order  of  adjudication  shall  be  made  against  a  firm  in 
the  firm  name,  but  it  shall  be  made  against  the  partners  individ- 
ually. 


(/)  See  Bank.  Rules,  1886,  r.  264,  infra. 

\g)  This  section  does  not  apply  to  firms  dissolved  before  the 
proceedings  are  taken,  see  Exparte  Young,  19  Ch.  D.  124. 


BANKRUPTCY.  697 

*  The  power  of  one  partner  to  act   for  the  firm  ex-  [  *  624] 
tends  to  proceedings  in  bankruptcy   (h).  Bk.  IV. 

One  partner  only  need  sign  a  petition  by  the  firm  for  ChaP-  4- 
adjudication  of  bankruptcy   against  a  debtor  to  it  (i).  Power  of 
So,  one  partner  may  prove  a  debt  owing  to  the  firm,  and  one  partner 
vote  on  behalf  of  the  firm  at  meetings  of  creditors  (k)  ;  *?  act  lor 
and,  notwithstanding  the  general  rule  prohibiting  one 
partner  from  binding  the  firm  by  deed,  it  has  been  de- 
cided that  one  partner  may,  by  a  power  of  attorney  ex- 
ecuted by  him  alone,  authorise  a  third  person  to  repre- 
sent the  firm  in  the  above  matters,  and  to  prove  and  vote 
on  its  behalf  accordingly  (I).     One  partner  could  un- 
der the  old  law  bind  the  firm  by  signing  the  certificate 
of  its  bankrupt  debtor  (m). 

On  the  other  hand  the  Bankruptcy  act,  1883,  pro-  Disabilities, 
hibits  the  partner  of  a  trustee  from  voting  on  questions 
relating  to  his  remuneration  (§88)  ;  nor  can  the  part- 
ner of  the  registrar,  official  receiver  or  other  officer,  do 
for  him  what  he  is  prohibited  by  the  act  from  doing 
himself  (§116  (2)  )  ;  nor  can  any  one  vote  for  any  re- 
muneration to  his  partner  any  more  than  to  himself 
(sched.  1,  r.  26)  ;  nor  can  an  affidavit  be  sworn  before 
the  partner  of  a  solicitor  before  whom  it  could  not  be 
sworn  (Bankruptcy  Rules,  1886,  r.  56  (2)  ). 

Under  the   present  law   all   persons  capable  of  con-  Distinctions 
tracting  debts,  whether  traders   or  non  traders,  can  be  between 
adjudicated  bankrupt  (n).     The  differences  formerly  ex-  Joy -traders, 
isting  between  these  two  classes  of  debtors  are  no  longer 
important;  except  that  the  *  doctrines  of  reputed  owner-  [  *  625] 
ship  are  confined  to  traders  and  persons  in  business  (o). 

{h)  46  &  47  Vict.  c.  52,  \  148. 

(/)  Bank.  Rules,  1886,  r.  259.  &c.,  and  form  10,  note.  See 
Brickland  v.  Newsome,  1  Camp.  474,  S.  C,  sub  nomine  Buckland 
v.  Newsame,  1  Taunt.  477. 

(k)  Ex  parte  Mitchell,  14  Ves.  597. 

(/)  Ex  parte  Mitchell,  14  Ves.  597,  and  Ex  parte  Hodgkinson, 
19  Ves.  291-298. 

(m)  Ex  parte  Hall,  17  Ves.  62  ;  Ex  parte  Fife,  2  M.  &  A.  577. 

(n)  46  &  47  Vict.  c.  52,  g  4.  Persons  having  privilege  of  Par- 
liament are  not  exempt,  g  32.  As  to  aliens,  see  g  6  (1)  (d),  Ex 
parte  Crispin.  8  Ch.  374,  and  as  to  foreign  members  of  English 
linns  Ex  parte  Blain,  12  Ch.  D.  523.  As  to  married  women.  \ 
152.  and  45  &  46  Vict.  c.  75,  g  1,  cl.  5  ;  Ex  parte  Coulson,  20  Q. 
B.  D.  249  ;  Re  Grissell,  12  Ch.  D.  484.  As  to  infants,  see  Ex 
parte  Jones,  18  Ch.  D.  109,  As  to  lunatics,  g  148  :  Bank.  Rules, 
1886,  r.  271  ;  Be  Lee,  23  Ch.  D.  216  ;  Be  James,  12  Q.  B.  D.  332; 
Ex  parte  Cahen,  10  Ch.  D.  183,  which,  however,  was  on  the  Act 
of  1*69. 

(o)  46  &  47  Vict.  c.  52,  §  44  (3b  As  to  persons  who  have 
ceased  to  trade,  see  Dawe  v.  Vergafa,  11  Q.  B.  D.  241,  but  note 
this  was  not  a  decision  ou  this  enactment. 


098 


BANKRUPTCY. 


Bk.  IV. 

Chap.  4. 
Sect.  1. 


Petition  for 

receiving 

order. 


In  order  that  a  debtor  may  be  adjudicated  bankrupt, 
he  must  have  committed  an  act  of  bankruptcy,  and  he 
himself  or  some  creditor  must  petition  for  a  receiving 
order  against  him  (p). 

It  is  not  the  object  of  the  present  treatise  to  expound 
the  law  of  bankruptcy,  except  so  far  as  it  is  a  branch 
of  the  law  of  partnership;  and  having  made  the  fore- 
going general  observations,  it  is  proposed  to  advert  only 
to  those  matters  which  relate  more  particularly  to  part- 
ners; the  reader  being  referred  to  works  on  bankruptcy 
for  further  information  on  this  subject. 


Section   I.  —  Adjudications    of    Bankruptcy    Against 
Partners. 


1.  As  to  acts  of  bankruptcy. 

Acts  of  Nothing  is  an  act  of  bankruptcy  which  is  not  declared 

bankruptcy,  to  be  so  by  statute  (q).  Moreover  an  act  of  bankruptcy 
is  a  personal  act  or  default,  and  is  not  to  be  imputed  to 
any  one  on  the  ground  of  agency  (r).  Consequently 
an  act  of  bankruptcy  committed  by  one  partner  cannot 
be  regarded  as  an  act  of  bankruptcy  committed  by  the 
firm  (s). 

The  acts  or  defaults  which  are  acts  of  bankruptcy  are 
stated  in  the  Bankruptcy  Act,  1883,  §  4,  which  is  as 
follows:— 

g  4. — (1.)  A  debtor  commits  an  act  of  bankruptcy  in  each  of 
the  following  cases: — 

(a. )  If  in  England  or  elsewhere  he  makes  a  conveyance  or 
assignment  of  his  property  to  a  trustee  or  trustees  for 
for  the  benefit  of  his  creditors  generally. 
(6.)  If  in  England  or  elsewhere  he  makes  a  fraudulent  con- 
veyance, gift,  delivery,  or  transfer  of  his  property,  or 
of  any  part  thereof : 
[  *  6261  *  (c-)  If  in  England  or  elsewhere  he  makes  any  convejrance 

or  transfer  of  his   property  or  any  part  thereof,   or 
creates  any  charge  thereon  which  would  under  this 
or  any  other  Act  be  void  as  a  fraudulent  preference  if 
he  were  adjudged  bankrupt: 
(d.)  If  with  intent  to  defeat  or  delay  his  creditors  he  does 


5,  aud  forms  4  and  10  to  rules  of 


(p)  46  &  47  Vict.  c.  52, 
1886. 

{q)  See  15-Ves.  462,  and  17  ib.  198. 

(r)  Ex  parte  Blain,  12  Ch.  D.  522,  and  see  infra. 

(s)  Ibid. 


ACTS  OF  BANKRUPTCY.  699 

any  of  the  following  things,  namely,  departs  out  of  Bk.  IV. 
England,  or  heing  out  of  England  remains  out  of  Chap.  4. 
England, or  departs  from  his  dwelling-house,  or  other-         '     


wise  absents  himself,  or  begins  to  keep  house: 

(e.)  If  execution  issued  against  him  has  been  levied  by 
seizure  and  sale  of  his  goods  under  process  in  an  action 
in  any  court,  or  in  any  civil  proceeding  in  the  High 
Court  (0 : 

(/.)  If  he  files  in  the  Court  a  declaration  of  his  inability  to 
pay  his  debts  or  presents  a  bankruptcy  petition  against 
himself: 

(g.)  If  a  creditor  has  obtained  a  final  judgment  against  him 
for  any  amount,  and  execution  thereon  not  having 
been  stayed  (»),  has  served  on  him  in  England,  or,  by 
leave  of  the  Court,  elsewhere,  a  bankruptcy  notice  un- 
der this  Act,  requiring  him  to  pay  the  judgment  debt 
iu  accordance  with  the  terms  of  the  judgment,  or  to 
secure  or  compound  for  it  to  the  satisfaction  of  the 
creditor  or  the  Court,  and  he  does  not,  within  seven 
days  after  service  of  the  notice,  in  case  the  service  is 
effected  in  England,  and  in  case  the  service  is  effected 
elsewhere,  then  within  the  time  limited  in  that  be- 
half by  the  order  giving  leave  to  effect  the  service, 
either  comply  with  the  requirements  of  the  notice,  or 
satisfy  the  Court  that  he  has  a  counterclaim  set  off  or 
cross  demand  which  equals  or  exceeds  the  amount  of 
the  judgment  debt,  and  which  he  could  not  set  up  in 
the  action  in  which  the  judgment  was  obtained  (x): 

(h)  If  the  debtor  gives  notice  to  any  of  his  creditors  that  he 
has  suspended,  or  that  he  is  about  Jo  suspend,  pay- 
ment of  his  debts. 
2.  A  bankruptcy  notice  under  this  Act  shall  be  in  the  pre- 
scribed  form,  and  shall  state  the  consequences  of  non-compli- 
ance therewith,  and  shall  be  served  in  the  prescribed  manner  {y). 

Almost  all  the  foregoing  acts  of  bankrupcy  have  been. 


(t)  Purchasers  from  the  sheriff  are  protected  by  £  46  (3). 

(«)  See  Be  Ide,  17  Q.  B.  D.  755,  judgment  against  the  firm  is 
not  a  judgment  against  a  member  until  execution  against  him 
can  be  issued;  see  Jud.  Rules,  1883,  Ord.  XLII.  r.  10.  An  inter- 
pleader order  that  the  sheriff  withdrew  is  a  stay,  Ex  parte  Ford, 
18  Q.  B.  D.  369.  A  judgment  against  a  married  woman's  sepa- 
rate estate  is  not  within  \  4  (g).  See  Ex  parte  Coulson,  20  Q.  B. 
D.  249. 

(a)  In  Ex  parte  Owen,  13  Q.  B.  D.  113,  a  notice  given  by  a 
solvent  partner  and  his  co-partner,  against  whom  a  receiving  or- 
der had  been  made  was  held  good.  A  valid  notice  may  be  given 
by  the  liquidator  of  a  company  being  wound  up,  Ex  parte  Win- 
terbottom,  18  Q.  B.  D.  446. 

(y)  See  Bank.  Rules,  1886,  Appx.  form  6. 


700  BANKRUPTCY. 

Bk.  IV.  made  the  subject  of  discussion  and  judicial  decision. 

Chap.  4.  jn  ^js  place,  *  however,  it  is  only  proposed  to  notice 

"  ec  '    ' those  which  relate  to  fraudulent  transfers  of  property. 

[  *  627]  A  transfer  of  property  is   not  an  act  of   bankruptcy, 

Fraudulent     unless  it  is  intended  to  pass  the  ownership  in  the  thing 
conveyances,  transferred  ;  a  mere  removal  of  property  is  not  an  act 
of  bankruptcy  (z). 

Notwithstanding  the  omission  from  clause  (6)  of  § 
4  of  the  words  "  with  intent  to  defeat  or  delay  his  cred- 
itors," the  fraud  referred  to  is  a  fraud  upon  creditors, 
and  not  upon  other  persons  (a);  and  such  fraud  must 
be  proved  as  a  matter  of  fact.  But  it  seems  to  be  set- 
tled that  where  a  person  without  any  actual  fraud  con- 
veys all  his  property  to  secure  a  past  debt,  he  commits 
an  act  of  bankruptcy  (b).  As  the  necessary  conse- 
quence of  such  a  conveyance  is  to  defeat  or  delay  cred- 
itors, it  is  said  that  an  intent  to  defeat  or  delay  them 
must  be  inferred  ;  and  that  such  a  conveyance  must  be 
fraudulent,  or  must  at  all  events  be  treated  as  if  it  were 
fraudulent.  This  reasoning  is  not  altogether  satisfac- 
tory (c).  It  is,  however,  probably  safe  to  say  that 
under  the  present  law,  as  under  the  previous  statutes,  a 
conveyance  or  assignment  by  a  debtor  of  all,  or  substan- 
tially all  (cl),  his  property,  either  in  satisfaction  of  (e),  or 
as  a  security  for  (/)  a  debt  previously  contracted,  is  an  act 
of  bankruptcy,  unless  made  pursuant  to  an  agreement  en- 
tered into  when  the  debt  was  contracted(g) ;  although  the 


(z)  Isitt  v.  Beeston,  L.  R.  4  Ex.  159. 

(a)  Re  Wood,  7  Ch.  302  ;  Ex  parte  Cohen,  ib.  20. 

(6)  Ibid.         • 

(c)  See  Ex  parte  Mercer,  17  Q.  B.  D.  290,  where  Freeman  v. 
Pope,  5  Ch.  538,  is  observed  upon. 

(d)  Re  Wood,  7  Ch.  302  ;  Ex  parte  Hawker,  ib.  214  ;  Ex  parte 
Cohen,  ib.  20  ;  Ex  parte  Foxley,  3  Ch.  515  ;  Ex  parte  Bailey.  3 
De  G.  M.  &  G.  534  .  Ex  parte  Bland,  6  ib.  757  ;  Stanger  v.  Wilk- 
ins,  19  Beav.  626.  Compare  Smith  v.  Timms.  1  H.  &  C.  849, 
where  it  was  held  that  a  bond  fide  assignment  by  a  trader  of  all 
his  property,  with  a  small  but  not  a  colourable  exception,  was 
not  an  act  of  bankruptcy.  See,  also.  Young  c.  Waud,  8  Ex.  221, 
where  the  assignment  was  upheld,  though,  if  enforced,  it  would 
have  stopped  the  assignor's  trade. 

(e)  Siebert  v.  Spooner,  1  M.  &  W.  714. 

(/)  Ex  parte  Payne,  11  Ch.  D.  539,  where  there  was  forebear- 
ance  ;  Re  Wood,  7  Ch.  302  ;  Ex  parte  Cohen,  ib.  20  ;  Ex  parte 
Hawker,  ib.  214  ;  Lindon  v.  Sharp,  6  Man.  &  Gr.  895;  Oriental 
Banking  Co.  v.  Coleman,  3  Gift".  11  ;  Turner  v.  Hardcastle,  11  C. 
B.  N.  S.  683. 

(g)  Ex  parte  Izard,  9  Ch.  271.  If  the  agreement  is  not  to  take 
effect  until  the  debtor  gets  into  difficulties,  the  agreement  will 
not  protect  the  transaction,  see  Ex  parte  Fisher,  7  Ch.  636  ;  Ex 
parte  Burton,  13  Ch.  D.  102;  Ex  parte  Kilner,  ib.  245  ;  Ex  parte 
Bolland,  8  ib.  230. 


cases. 


ACTS  OF  BANKRUPTCY.  701 

conveyance  or  assignment  *  is  made  bond  fide  and  un-  [  *  62S  J 
der  pressure  from  the   creditor  (h);  and  although  the  Bk.  IV. 
creditor  does  not  know  that  he  is  taking  all  his  debt-  ^nap-  4- 

or's  property  (*').     A  conveyance  or  assignment  of  part     '  

only  of  a  debtor's  property  is  also  an  act  of  bankruptcy 
if  it  is  void  under  §  -48  as  amounting  to  a  fraudulent 
preference  (k).     That  section  is  as  follows  : — 

§  48. — (1.)  Every  conveyance  or  transfer  of  property,, or  charge  Avoidance  of 
thereon  made,  every  payment  made,  every  obligation  incurred,  preferences 
aud  every  judieial  proceeding  taken  or  suffered  by  any  person  *n  certain 
unable  to  pay  his  debts  as  they  become  due  from  his  own  money  car 
in  favour  of  any  creditor,  or  any  person  in  trust  for  any  creditor, 
with  a  view  of  giving  such  creditor  a  preference  over  the  other 
creditors  shall,  if  the  person  making,  taking,  paying,  or  suffer- 
ing the  same  is  adjudged  bankrupt  on  a  bankruptcy  petition 
presented  within  three  months  after  the  date  of  making,  taking, 
paying,  or  suffering  the  same,  be  deemed  fraudulent  and  void  as 
against  the  trustee  in  the  bankruptcy  (/). 

(2.)  This  section  shall  not  affect  the  rights  of  any  person  mak- 
ing title  in  good  faith  and  for  valuable  consideration  through  or 
under  a  creditor  of  the  bankrupt. 

This  section  does  not  avoid  as  a  fraudulent  preference 
a  conveyance  or  transfer  of  property  unless  three  things 
concur,  viz. :— 1.  The  conveyance,  &c,  must  be  made 
by  a  person  unable  to  pay  his  debts  as  they  become  due  ; 
2nd.  It  must  be  made  with  a  view  of  giving  a  creditor 
a  preference  over  others  ;  3rdly.  It  must  be  made 
within  three  months  of  the  bankruptcy  petition.  As 
regards  the  second  requisite,  a  conveyance,  &c,  made 
spontaneously  by  the  debtor  and  without  any  demand 
or  pressure  from  the  creditor,  or  even  in  willing  com- 

(/()  .Re Wood,  7  Ch.  302;  Jones  v.  Harber,  L.  R.  6  Q.  B.  77;  Wood- 
house  v.  Murray.  L.  R.  4  Q.  B.  27  ;  Newton  v.  Chantler,  7  East, 
138 ;  Smith  v.  Cannan,  2  E.  &  B.  35  ;  Leake  v.  Young,  5  ib.  955  ; 
Stanger  v.  Wilkins,  19  Beav.  620. 

(i)  Smith  v.  Cannon,  2  E.  &  B.  35. 

{k)  See  \  4  [c\  which  settles  the  point  raised  in  Ex  parte  Holli- 
day,  8  Ch.  283,  and  Ex  parte  Norton,  16  Eq.  397. 

(I)  N.B. — The  section  does  not  enable  other  persons  to  invali- 
date such  transactions,  Willmottv.  London  Celluloid  Co.,  31  Ch. 
D.  425,  and  34  ib.  147  ;  Ex  parte  Cooper,  10  Ch.  510  Section  47 
of  the  Bankruptcy  Act,  1883,  does  not  apply  to  the  administra- 
tion by  the  court  in  bankruptcy  of  the  estate  of  a  deceased  in- 
solvent under  \  125  of  that  act.  Ex  parte  Official  Receiver,  Re 
Gould,  19  Q.  B.  D.  92.  Still  less  does  #  47  apply  to  ordinary  ad- 
ministration actions  in  the  High  Court.  The  Judicature  Act, 
1875,  \  10,  does  not  render  it  so  applicable.  Similar  observa- 
tions apply  to  the  group  of  sections  43-48  of  the  Bankruptcy 
Act,  1883.     See  the  judgments  in  the  same  case. 


(02 


BANKRUPTCY. 


Bk.  IV. 
Chap.  4. 
Sect.  1. 


[  *  6291 


Sales,  &c, 
for  present 
considera- 
tion. 


pliance  with  such  a  demand,  is  deemed  to  be  made  with 
a  view  of  giving  a  ^preference  (wi),  unless  the  evidence 
shows  that  it  was  made  with  some  other  view  (n).  And 
even  if  there  is  pressure  a  conveyance  or  payment  to  a 
class  of  creditors,  or  to  a  trustee  for  them,  is  within  the 
section  (o). 

On  the  other  hand  a  sale  or  mortgage  by  a  debtor  of 
all  his  property  for  a  present  advance,  made  bond  fide 
to  enable  him  to  carry  on  his  business,  is  not  an  act  of 
baakruptcy  (p);  although  the  purchaser  may  be  a 
creditor  and  may  only  pay  the  difference  between  the 
purchase-money  and  what  is  owing  to  him  (q).  So  the 
bond  fide  giving  security  for  present  or  future  advances 
agreed  to  be  made  (?*),  or  for  any  other  advantage,  e.g., 
an  agreement  to  give  time  (s),  is  not  an  act  of  bank- 
ruptcy, although  the  security  may  comprise  all  the  bor- 
rower's property  (t),  and  cover  an  antecedent  debt  (u). 

(m)  See  on  this  section  Ex  parte  Griffiths.  23  Ch.  D.  69  ;  Ex 
parte  Hill,  ib.  695  ;  Ex  parte  Pearson,  8  Ch.  667;  Exparte  Topham, 
ib.  614  ;  Exparte  Bolland,  7  Ch.  24  ;  Exparte  Tempest,  6 Ch.  70, 
affirming  Ex  parte  Craven,  10  Eq.  648,  as  to  the  distinction  be- 
tween acts  which  are  voidable  on  the  ground  of  fraudulent  prefer- 
erence,  and  acts  which  are  avoided  by  reason  of  the  relation  back 
of  the  trustee's  title.     Marks  v.  Feldman,  L.  R.  5  Q.  B.  275, 

(n)  See  Exparte  Taylor,  18  Q.  B.  D.  295,  where  the  object  was 
to  avoid  a  criminal  prosecution.  See,  also,  Exparte  Mercer,  17 
ib.  290. 

(o)  Exparte  Saffery,  4  Ch.  D.  555,  affirmed  3  App.  Ca.  213,  sub 
nom.  Tompkins  v.  Saffery. 

{p)  Exparte  Reed  and  Steel,  14  Eq.  586;  Baxter  r.  Pritchard, 
1  A.  &  E.  456;  Lee  r.  Hart,  11  Ex.  880,  and  10  Ex.  555.  In 
each  of  these  cases  the  seller  contemplated  bankruptcy,  but  the 
purchaser  acted  bond  fide.  See,  as  to  mortgages,  Be  Colemere,  1 
Ch.  128. 

(q)  Exparte  Norton,  16  Eq.  397;  Bell  v.  Simpson,  2  H.  &  N. 
410;  Pennell  r.  Dawson,  18  C.  B.  355;  Pennell  v.  Reynolds.  11 
ib.  N.  S.  709.  Compare  Graham  v.  Chapman,  12  C.  B.  85, where 
the  advance  was  itself  included  in  the  assignments.  This  case, 
however,  cannot  now  be  relied  upon.  See  the  above  cases,  and 
Lomax  v.  Buxton,  L.  R.  6  C.  P.  107. 

(r)  Exparte  Dann,  17  Ch.  D.  26;  Ex  parte  Wilkinson,  22  ib 
788. 

(s)  As  in  Philps  v.  Hornstedt,  1  Ex.  D.  62,  affirming  S.  C.  L. 
R.  8  Ex.  26.  Compare  Ex  parte  Wood,  10  Ch.  D.  313;  Wood- 
house  v.  Murray,  L.  R.  4  Q.  B.  27. 

(t)  Hutton  v.  Crutwell,  1  E.  &  B.  15;  Bittlestone  v.  Cooke,  6 
E.  &  B.  296;  Harris  r.  Rickett,  4  H.  &  N.  1.  But  see  Ex  parte 
Sparrow,  2  De  G.  M.  &  G.  907.  A  bund  fide  mortgage  of  part  of 
a  trader's  property  is  clearly  not  an  act  of  bankruptcy,  see 
Mather  v.  Fraser,  2  K.  &  J.  536. 

(u)  Ex  parte  Izard,  9  Ch.  271;  Exparte  Hodgkin,  20  Eq.  746; 
Allen  v.  Bonuett,  5  Ch.  577;  Pennell  v.  Reynolds.  11  C.  B.  N.  S. 
709;  Shrubsole  v.  Sussams,  16  ib.  452.  Compare  Ex  parte  Fisher, 
7  Ch.  636,  where  the  present  advance  was  made  to  obtain  secur- 
ity for  a  past  debt. 


ACTS  OF  BANKRUPTCY.  703 

Still  less  does  *a  person  commit  an  act  of  bankruptcy  [  *  630] 
by  bond  fide  conveying  or  assigning  part  of  his   prop-  Bk.  IV. 
erty  in  payment  of,  or  as  a   security  for,  a   debt  in  re-  J™1*"  4* 

spect  of  which  he  is  being  pressed  (x);    and  notwith- ! ! 

standing  §  4,  cl.  1  (a)  it  is  apprehended  that  a  bond 
fide  assignment  of  part  of  his  property  upon  trust  for 
sale  and  payment  of  all  his  debts  is  not  an  act  of  bank- 
ruptcy (y). 

In  connection  with  this  subject  it  is  important  to  ob-  Protected 
serve  the  clause  at  the  end  of  §  48,  protecting  persons  transactions, 
making  title  in  good  faith  and  for  valuable  considera- 
tion throiagh  a  creditor  of  the  bankrupt  (z),  and  also  § 
49,  which  relates  to  dealings  with  the  bankrupt  himself 
without  notice  of  any  act  of  bankruptcy.  This  section 
will  be  referred  to  more  at  length  hereafter  (infra,  s. 
2).  This  protecting  clause  applies  to  the  unsolicited 
payment  of  a  debt  if  the  creditor  accepts  payment  bond 
fide  in  the  ordinary  course  of  business,  and  in  ignor- 
ance of  any  available  act  of  bankruptcy  of  his  debtor  (a). 
A  fortiori  the  clause  applies  to  a  return  under  pressure 
of  goods  not  paid  for  (6). 

Moreover,  a  debtor  who  is  a  trustee   and  who  gives  Fraudulent 
to  his   cestui  que   trust,   or  sets    apart  for  him    that  preference  by 
which  in   equity    is    his,   does   not   commit  an   act   of  trustees, 
bankruptcy,  and  although  the  gift  or  setting  apart  may 
have  been  made  in  immediate  contemplation  of  bank- 
ruptcy, it  cannot  be  deemed  a  fraudulent  preference  (c). 

In  order  that  a  conveyance  or  assignment  may  be  an  Effect  of 
act  of  bankruptcy,  it  must  be  made  within  three  months  lapse  of  three 
before  *the  presentation  of  the  petition  (d).     But  al-  [*631] 
though  more  than  three  months  may  have  elapsed  since  months  alter 


(x)  Ex  parte  Craven,  10  Eq.  648,  and  under  the  name  Ex  parte 
Tempest,  6  Ch.  70;  Ex  parte  Bolland,  7  Ch.  24;  Crosby  v.  Crouch, 
11  East,  256;  Young  v.  Waud,  8  Ex.  221;  Hale  v.  Allnutt,  18  C. 
B.  505;  Strachan  v.  Barton,  11  Ex.  647,  where  the  debt  had  not 
been  payable.  See,  too,  Belcher  /•.  Prittie,  10  Bing.  408;  Ban- 
natyne  v.  Leader,  10  Sim.  350;  Johnson  v.  Fesenmeyer,  25  Beav. 
88,  and  3  De  G.  &  J.  13. 

\y)  Bannatyne  v.  Leader,  10  Sim.  350;  Berney  v.  Davison,  1 
Brod.  &  B.  408;  Berney  v.  Vyner,  ib.  482.  But  an  attempt  to 
prefer  some  creditors  to  others  is  clearly  void,  Ex  parte  Saffrey,  4 
Ch.  D.  555,  and  3  App.  Ca.  213. 

(z)  Ante,  p.  628. 

(a)  See  under  the  old  law.  Butcher  v.  Stead,  L.  R.  7  H.  L. 
839;  Ex  parte  Hodgkin,  20  Eq.  746. 

(b)  Ex  parte  Topham,  8  Ch.  614;  Ex  parte  Blackburn,  12  Eq. 
358. 

(c)  See  Ec  parte  Taylor,  18  Q.  B.  D.  295;  Ex  parte  Kelly  &Co., 
11  Ch.  D.  306;  Edwards  v.  Glyn,  2  E.  &  E.  29;  Sinclair  v.  Wil- 
son, 20  Beav.  324;  Gardner  v.  Rowe,  2  Sim.  &  Stu.  346. 

(d)  I  6  (c). 


the  convey- 
ance. 


704 


BANKRUPTCY. 


Bk.  IV. 

Chap.  4. 
Sect.  1. 


an  assignment  was  made,  it  may  be  impeached  for 
fraud  under  the  statute  of  13  Eliz.  c.  5  (e);  or  be  in- 
validated by  the  relation  back  of  the  title  of  the  trus- 

Conveyances,  tees  (/). 

&c,  by  part-  The  foregoing  doctrines  are  of  considerable  import- 
ance to  partners  ;  for  even  if  an  assignment  is  intended 
to  be  executed  by  all  the  partners,  and  it  is  in  fact  exe- 
cuted by  one  of  them  only,  still  its  execution  by  that 
one  may  be  an  act  of  bankruptcy  on  his  part  (g). 
Moreover,  if  all  the  partners  execute  the  deed,  and  one 
of  them  only  becomes  bankrupt,  the  deed  is  avoided  as 
to  all  of  them  (h).  Again,  if  partners  assign  all  their 
property  to  a  person  who  undertakes  to  pay  their  debts, 
they  thereby  commit  an  act  of  bankruptcy  (i).  So,  if 
partners,  have  resolved  to  stop  payment,  and  they  give 
cheques  to  particular  creditors  with  a  view  to  prefer 
them,  that  amounts  to  a  fraudulent  preference  and  an 
act  of  bankruptcy  on  the  part  of  the  firm  (k)  ;  unless 
the  payments  are  protected  under  §  49  already  noticed. 

Convevance        But  a  conveyance  by  one  partner  of  all  his  separate 

by  one  part-  property  to  a  trustee,  upon  trust  for  sale  and  payment 
of  the  debts  of  the  firm,  is  not  an  act  of  bankruptcy  if 
made  bond  fide  for  the  purpose  of  relieving  the  firm  from 
its  difficulties,  and  of  enabling  it  to  carry  on  its  busi- 
ness, and  if  it  is  not  made  for  the  purpose  of,  and  has 
not  in  fact  the  effect  of,  defrauding  the  separate  cred- 
itors of  the  assignor  (I).  And  it  is  apprehended*  that 
a  conveyance  by  a  firm  of  all  its  joint  estate  would  not 
be  an  act  of  bankruptcy  if  the  separate  creditors  of  the 
-partners  were  not  prejudiced  (m).     But  a  mortgage  of 

Jf  joint  estate  in  favour  of  separate  creditors  will    be  a 
fraud  on  the  joint  creditors,  and  therefore  an  act  of  bank- 

(e)  See,  as  to  this,  Ex  parte  Chaplin,  26  Ch.  D.  319;  Ex  parte 
Games.  12  Ch.  D.  314;  Allen  v.  Bonnett,  5  Ch.  577;  Marks  v. 
Feldman,  L.  R.  5  Q.  B.  275;  Jones  v.  Harber,  L.  R.  6  Q.  B.  77; 
Hassel  v.  Simpson,  1  Bro.  C.  C.  99,  better  reported  in  1  Dougl. 
89,  note,  under  the  name  of  Hassells  v.  Simpson;  Pulling  v. 
Tucker,  4  B.  &  A.  382;  Ex  parte  Sparrow,  2  De  G.  M.  &  G.  907; 
Exparte  Taylor,  Sib.  392;  Oswald  v.  Thompson,  2  Ex.  215;  Ex 
parte  Thomas,  De  G.  012;  Ex  parte  Jackson,  ib.  609. 

(/)  Under  \  43  of  the  act.     See  infra,  I  2. 

(g)  See  Bowker  v.  Burdekin,  11  M.  &  W.  128. 

(h)  See  Ex  parte  Addison,  3  Mon.  &  A.  434. 

(i)  Ex  parte  Zwilchenbart,  3  M.  D.  &  D.  671.  See,  too,  Tur- 
quand  v.  Vanderplank,  10  M.  &  W.  180. 

(k)  Exparte  Simpson,  De  Gex,  9;  Bevan  v.  Nunn,  9  Bing.  107. 

(?)  Abbott  v.  Burbage,  2  Bing.  X.  C  444;  and  see  Beniey  r. 
Davison,  1  Brod.  &  B.  408,  and  Berney  v.  Viuer,  ib.  482,  and  the 
next  note. 

(m)  See  as  to  this,  \  4,  cl.  1  (a),  and  Ex  parte  Saffery,  4  Ch.  D. 
555. 


ner  m 
trust  for 
creditors  of 
trm. 


[*632] 


ACTS  OF  BANKRUPTCY.  705 

ruptcy  if  the  joint  estate  is  insolvent  (n)  ;  and  a  mort-  Bk.  IV. 
gage  by  a  partner  of  his  separate  estate  in  favour  of  Chap.  4. 

joint  creditors  would,  it  is  apprehended,  be  equally  in-       t-       

valid  if  it  prejudiced  his  separate  creditors. 

An  ordinary  conveyance  or  assignment  by  one  partner  Conveyances 
to  another  is  not  (with  reference  to  the  present  sub-  from  one 
ject)  distinguishable  from  any  other  conveyance  or  as-  Partner  to 
signment.     But  as  each  partner  has  a  lien  on  the  part-  another- 
nership  property  for  what  is  due  from  the  firm  to  him 
as  a  partner,  it  has  been  held  that  a  bond  fide  assign- 
ment by  one  partner  of  all  his  share  and  interest  in  the 
partnership  assets  to  his  co  partner,   upon  trust,  first, 
to  pay  the  partnership  debts,  secondly,  to  retain  what 
is  due  to  himself  from  the  firm,  and  thirdly,  to  divide 
the  surplus  between  the  partners,  does  not  constitute  an 
act  of  bankruptcy  on  the  part  of  the  assignor,  although 
he  may  have  had  little  other  property  than  that  com- 
prised in  the  assignment  (o).     Such  an  assignment  does 
not,  in  fact,  do  more  than  enable  the  assignee  to  work 
out  the  lien  which    he  had    previously  to,   and  inde- 
pendently of,  the  assignment,  and    is  not  within  the 
words  of  §  4,  cl.  1  (a). 

In  order  to  sustain  a  joint  adjudication  against  two  Rules  as  to 
or  more  persons,  it  is  necessary  that  some  act  of  bank-  Join*  adjud- 
ruptcy  shall  have  been  committed  by  each  of  them  ( p).  lcatlons- 
But  it  is  not  requisite  that  they  should  all  have  com- 
mitted an  act  of  bankruptcy  of  the  same  kind.     Thus, 
it  will  be  sufficient  if  one  has  departed  the  realm  with 
intent  to  defraud  his  creditors,  and  another  has  kept 
his  house  to  avoid  them,  and  a  third  has  lain  in  gaol 
for  debt,  and  so  on  (q).     But  if  a  joint  act  of  bank- 
ruptcy is  relied  *  upon,  all  the  partners  must  be  proved  [  *  633] 
to  have  concurred  in  it  (r). 

An  act  of  bankruptcy  committed  by  one  partner  will  Act  of  bank- 
not  amount  to  an  act  of  bankruptcy  on  the  part  of  his  ruptcy  coni- 
co-partners,  unless   it  can   be  shown  to  have  been,  in  mvtted  J>y 
point  of   fact,  their  act  as   well    as   his.      The  case  of  onlyf*"  ^ 
Mills  v.  Bennett  (s)  is  a  strong  instance  of  this  ;   there  Mills  v. 
■ Bennett. 

(n)  Exparte  Snowball,  7  Ch.  534. 

(o)  See  Payne  v.  Hornby,  25  Beav.  280,  where  the  assignor  was 
a  surviving  partner,  and  the  assignee  the  executor  of  his  deceased 
partner. 

(p)  Beasley  v.  Beasley,  1  Atk.  97  ;  Mills  v.  Bennett,  2  M.  &  S. 
556  ;  Allen  v.  Hartley,  4  Doug.  20  ;  Dutton  v.  Morrison,  17  Ves. 
193  ;  Hogg  v.  Bridges,  8  Taunt.  200. 

(q)  Watson  on  Part.  248. 

(r)  See  the  cases  in  the  next  note. 

(s)  2  M.  &  S.  550,  See,  too,  Ex  parte  Blaine,  12  Ch.  D.  522  ; 
Exparte  Mavor,  19  Ves.  543  ;  Ex  parte  Addison,  3  DeG.  &S.  580. 

*  22   LAW   OF   PARTNERSHIP. 


706 


BANKRUPTCY. 


Bk.  IV. 
Chap.  4. 
Sect.  1. 


Time  of 
commission 
of  the  act  of 
bankruptcy. 

Dormant 
pgrtners. 


one  of  three  bankers  resided  at  the  bank,  and  alone  con- 
ducted the  business  of  the  firm,  his  co-partners  residing 
at  a  distance.  The  resident  and  acting  partner  absented 
himself  from  the  bank,  shut  it  up,  and  stopped  pay- 
ment, and  it  was  held  that  this  was  not  sufficient  to 
support  a  joint  adjudication  against  the  three  partners. 

In  order  to  support  a  joint  adjudication  against  all 
the  members  of  a  firm,  each  must  have  committed  an 
act  of  bankruptcy  during  the  continuance  of  a  joint 
debt  (t). 

A  dormant  partner  may  be  either  included  in  an  ad- 
judication against  the  firm  (u),  or  be  adjudged  bank- 
rupt on  a  petition  against  him  separately  (x).  The 
same,  it  is  apprehended,  is  true  of  nominal  partners  (y). 


2.   The  petitioning  creditor's  debt. 


Who  may 
petition. 


634] 


The  petitioning  creditor  may  be  an  ordinary  individ- 
ual, or  a  company  empowered  to  sue  and  be  sued  by  a 
public  officer  (z),  or  a  corporation  (a),  e.  g.,  a  registered 
company  (b). 

An  unincorporated  company  may  petition  against 
one  of  its  shareholders  (c).  So  the  trustee  of  a  friendly 
society  may  *  petition  against  a  member,  in  respect  of  a 
debt  owing  by  the  member  to  the  society  (d). 

If  a  single  individual  petitions,  the  debt  in  respect  of 
which  he  petitions  must  be  owing  to  him  solely,  and 
not  to  him  and  others  jointly  (e).  "When,  however,  a 
firm  petitions,  the  petition  need  only  be  signed  by  one 
of  the  partners  (/).     If  one  member  of  a  firm  is  bank- 


(f.)  See  Ex  -parte  Bamford,  15  Ves.  449  ;  Ex  parte  Dewdney,  ib. 
495. 

(u)  As  in  Exparfe  Lodge  and  Feudal.  1  Ves.  J.  166. 

(x)  As  in  Ex  parte  Hamper,  17  Ves.  403. 

(?/)  Ex  parte  Murton,  1  M.  I).  &  D.  252,  is  an  example  of  an 
adjudication  against  a  firm  of  two,  one  of  whom  was  only  liable 
to  third  persons,  in  consequence  of  his  having  held  himself  out 
as  a  partner. 

(s)  Bank.  Kules,  1886,  rule  258.  As  to  the  old  law,  see  Guthrie 
v.  Fisk,  3  B.  &  C.  178.  As  to  the  mode  of  describing  him,  see 
Ex  parte  Torkington,  9  Ch.  298. 

(a)  46  &  47  Vict.  c.  52,  §  168,  "Person."  Ex  parte  Collins, 
De  Gex,  381  ;  Ex  parte  Sneyds,  1  Moll.  261. 

(6)  Re  Calthrop,  3  Ch.  252. 

(e)  See  Ex  parte  Hall,  Mon.  &  Ch.  365. 

(d)  Hope  v.  Meek.  10  Ex.  829. 

(e)  Buckland  v.  Newsame,  1  Taunt.  477. 

(/)  46  &  47  Vict.  c.  52,  \  115,  and  form  10  in  Sched.  to  the 
Bank.  Rules,  1886,  and  as  to  the  affidavit  in  support,  see  rules 
149  to  151,  and  form  12. 


PETITIONING  CREDITOR  S  DEBT.  70" 

rupt  his   trustee    should  be  a  co-petitioner  with   the  Bk.  IV. 
solvent  partners  (g).  ^haP-  4- 

The  amount  of  the  aebt  due  to  the  petitioning  cred- 


itor or  creditors  must  be  50Z.  at  least  (h);  and  if  the  Amount  of 
debt  is  secured,  the  security  must  be  given   up  or  its  petitioning 
value  must  be  estimated  and  deducted,  and  the  petitioner  ^"L1  m 
must  give  it  up,  if  required,  at  its  estimated  value  (/). 
A  debt,   however,  of  50Z.  bought  up  for  less  than   that 
sum  is  sufficient  in  amount  (k). 

By  the  Bankruptcy  Act,  1883,  §  6,  cl.  1  (b),  the  peti-  Nature  of 
tioning  creditor's  debt  must  be  a  liquidated  sum  pay-  tlebt- 
able  either  immediately  or  at  some  certain  future  time. 

A  debt  proved  under  a  former  bankruptcy  will  sup- 
port a  second  adjudication,  the  object  of  which  is  to 
impeach  transactions  not  impeachable  under  the  first  (I). 

Even  where   a    person  is   a  creditor  to    a  sufficient  Circum- 
amoant,  where  his  debt  has  accrued  at  the  proper  time,  stances 
and  where  the  debtor  has  committed  an  act  of  bank-  y*icn  pre- 
ruptcy,  there  may  be  circumstances  which  preclude  the  creciitor 
creditor  from  obtaining  adjudication  against  his  debtor,  from  peti- 
For  example,  the  creditor  may  be   an  alien   enemy,  as  tioning. 
where,  though  a  British  subject,  he  is  residing  and  trad- 
ing in  an  enemy's  country  without  license  (in);  or,  the 
creditor  may  rely  on  an  act  of  bankruptcy,  to  which  he 
has  himself  been  privy,  as  where  the  debtor  has  assigned 
all  his  property  in  trust  for  his  creditors,  and  the  pe- 
titioner is  a  creditor  who  is  bound  by  such  *  assign-  [  *635] 
ment  (n);  in  such  cases  as  these,  an  adjudication  at  his 
instance  cannot  be  supported. 

A  partner  who  is  a  creditor  of  his  co-partner,  may  Petition  by 
petition  for,  and  obtain  a  receiving  order   against   his  one  partner 
co-partner  (o).       This  is  clear,   from  many  cases,  of  aSanist 
which  Ex  parte  Notley  (p)  may  be   taken  as   a   type. 
There  the  petitioning  creditor  had  lent  the  bankrupt  a  Noth'v 
sum  of  money  upon  the  terms  of  receiving  interest  at 
hi.  per  cent.,  and  a  share  in  the  net  profits  of  the  bank- 
rupt's business,  so  long  as  the  principal  remained  un- 
paid ;  repayment  of  the  principal  and  interest  was  se- 

{g\  Ex  parte  Owen,  13  Q.  B.  D.  113. 

(h)  46  &  47  Vict.  c.  52,  \  6  (1,  a). 

(i)  lb.  \  6  (2). 

(k)  Doe  v.  Ingelby,  14  M.  &  W.  91. 

(1)  kx  parte  Wieland,  5  Ch.  486. 

(m)  McConnell  v.  Hector,  3  Bos.  &  P.  113. 

(n)  Ex  parte  Payne,  De  Gex,  534. 

(o)  See,  in  addition  to  the  cases  noticed  in  the  text,  Windham 
v.  Paterson,  2  Rose,  466  ;  Ex  parte  Nokes.  and  Ex  parte  Maberley, 
1  Mont,  on  Part.,  note  N.,  p.  62. 

(p)  1  Mon.  &  Ayr.  46. 


708 


BANKRUPTCY. 


Bk.  IV. 
Chap.  4. 
Sect.  1. 


Ex  parte 
Richardson. 


Ex  parte 
Gray. 

[*636] 


Improper 
petitions  by 
one  partner 
against  his 
co-partner. 


cured  by  a  bond  and  a  judgment.  The  principal  so  lent, 
together  with  some  arrears  of  interest  thereon,  consti- 
tuted the  petitioning  creditor's  debt,  and  it  was  held 
sufficient;  for  although  the  borrower  and  the  lender  were 
liable  to  strangers  as  if  they  were  partners,  the  debt  in 
question  had  nothing  to  do  with  the  partnership  ac- 
counts, and  might  have  been  recovered  by  action  at 
law.  Again,  in  Ex  parte  Richardson  ( q ),  two  brothers, 
Henry  and  William,  had  been  partners,  and  had  dis- 
solved partnership.  On  the  dissolution,  the  accounts 
were  taken,  and  the  firm  was  found  debtor  to  William 
in  1000Z.  and  upwards.  Henry  continued  the  business, 
without  paying  off  what  was  due  to  his  brother,  and 
borrowed  from  him  from  time  to  time  other  monies, 
which  were  placed  to  William's  credit  in  his  account 
with  the  late  firm.  William  petitioned  for  an  adjudi- 
cation against  Henry,  and  was  held  to  have  a  sufficient 
debt  (r). 

But,  in  order  that  a  debt  may  be  sufficient  to  support 
a  petition  for  a  receiving  order,  the  debt  must  be  one 
to  which  there  is  no  equitable  defence.  This  was  so 
under  the  previous  statutes,  as  is  shown  by  Ex  parte 
Gray  (s),  where  the  petitioner  was  not  the  creditor 
partner  himself,  but  his  trustee.  Hodges  *  and  Gray 
were  partners.  Hodges  had  brought  in  1000Z.  as  his 
share  of  the  partnership  capital,  and  had  lent  Gray 
1000Z.,  which  he  brought  in  as  his  share.  Gray  had  cov- 
enanted with  Hodges  to  repay  him  this  sum  with  inter- 
est ;  and,  as  a  further  security  Gray  had  executed  a 
mortgage  to  a  trustee  for  Hodges,  and  had  covenanted 
with  the  trustee. to  pay  him  the  same  sum  with  interest. 
Hodges  had  filed  a  bill  for  a  dissolution  of  partnership, 
and  for  an  account.  His  trustee  then  petitioned  for, 
and  obtained  an  adjudication  of  bankruptcy  against 
Gray  ;  but  the  adjudication  was  annulled,  on  the  ground 
that  Hodges,  having  filed  a  bill  for  an  account,  would 
not  have  been  allowed  to  sue  for  the  1000Z.  at  law,  and 
that  his  trustee  was  in  no  better  position  than  himself. 

In  connection  with  this  subject,  it  may  be  observed 
that  under  the  older  statutes,  although  one  partner 
might  have  obtained  an  adjudication  of  bankruptcy 
against  his  co-partner,  still,  if  it  appeared  that  the  real 


(q)  3D.  &Ch.  244. 

(r)  In  this  case  there  was  a  sufficient  debt  irrespectively  of  the 
balance  found  due  to  William  on  the  dissolution,  but  the  brothers 
treated  the  loans  made  subsequently  as  if  made  to  the  late  firm. 

(s)  2  Mon.  &  A.  283.  See,  also,  Ex  parte  Page,  1  Gl.  &  Jam. 
100  ;  Hope  v.  Meek,  10  Ex.  842. 


THE  ADJUDICATION.  709 

object  of  the  petitioner  was  to  dissolve  the  partnership,  Bk.  IV. 
and  that  an  adjudication  of  bankruptcy  was   not    re-  £naP' 4' 

quired  for  any  other  purpose,  the   adjudication  would  k ' 

be  annulled  (t).  So  it  would  if  it  had  been  obtained 
on  the  petition  of  a  creditor  acting  at  the  instigation  of 
one  of  the  partners  ;  and  whether  the  adjudication  was 
against  the  whole  firm,  or  one  only  of  its  members,  was 
immaterial  (u).  It  is  apprehended  that  under  the 
Bankruptcy  Act,  1883,  the  Court  will  also  dismiss  a 
petition  or  annul  a  receiving  order  on  similar  grounds  (x). 

*3.   Of  joint  and  separate  adjudications.  [*637] 

A  debt  owing  by  one  partner  only  will  not  support  a  Joint  debt 

joint  adjudication  against  him  and  his  co-partners  (y);  wil1  support 

but,  a  debt  owing  bv  all  the  partners  of  a   firm   is  suf-  a ,s.e;,:'1;lte 
,.    .      ,   ,  Y     "        t     t      j-  •      i  adiudication. 

ficient  to  support  an  adjudication   against  any  one  or 

more  of  them  (z) ;  and  probably,  a  debt  owing  by  several 
persons  jointly  will  support  an  adjudication  against 
any  one  or  more  of  them,  although  they  may  not  be  all 
the  members  of  a  firm,  or  indeed  partners  at  all  (a). 

Where  a  receiving  order  is  made  against  a  firm,  the 
joint  and  separate  creditors  are  collectively  convened 
to  the  first  meeting  of  creditors  (6).  The  trustee  ap- 
pointed by  the  joint  creditors  is  the  trustee  of  the 
separate  estate  (c).  If  two  or  more  members  of  a  firm 
constitute  a  separate  and  independent  firm,  the  creditors 
of  such  firm  are  deemed  to  be  a  separate  set  of   cred- 


(t)  Ex  parte  Christie,  Mont.  &  Bl.  314  ;  Ex  parte  Browne.  1 
Rose,  151  ;  Ex  parte  Johnson,  2  M.  D.  &  D.  678  ;  Ex  parte  Phipps, 
3ib.  505.     But  see  Ex  parte    Upfill,  1  Ch.  439. 

(u)  See,  in  addition  to  the  cases  just  cited,  Ex  parte  Hall,  3 
Deac.  405  ;  Ex  parte  Bourne,  2  Gl.  &  J.  137  ;  Ex  parte  Harcourt, 
2  Rose,  214,  215  ;  Ex  parte  Galliniore,  ib.  434.  In  Ex  parte  Nash, 
12  Jur.  494,  Ex  parte  Parkes,  3  Deac.  31,  and  Ex  parte  Wilbran, 
alias  Wilbeam,  5  Madd.  1,  and  Buck,  459,  the  Court  refused  to 
supersede  the  commission,  not  being  satisfied  that  it  had  been 
obtained  with  an  improper  object.  See.  also,  Ex  parte  Upfill,  1 
Ch.  439. 

(x)  See  Ex  parte  Grifiin,  12  Ch.  D.  480  ;  Ex  parte  Harper,  20  ib. 
685.  As  to  annulling  on  equitable  grounds,  see  Ex  parte  Clax- 
ton,  7  Ch.  532  ;  and  as  to  injunctions  to  restrain  proceedings  in 
bankruptcy,  see  Attwood  v.  Banks,  2  Beav.  192  ;  Perry  v.  Walker, 
1  Y.  &  C.  C.  672  ;  Pirn  v.  Wilson,  2  Ph.  653. 

(y)  See  Ex  parte  Clarke,  1  D.  &  C.  544. 

(z)  46  &  47  Vict.  c.  52,  ?  110.  See,  as  to  members  of  com- 
panies empowered  to  sue  and  be  sued  by  public  officers,  Davison 
v.  Farmer,  6  Ex.  242,  overruling  Ex  parte  Wood,  1  M.  D.  &D.  92. 

(a)  See  Ex  parte  Chambers,  2  M.  &  A.  440. 

(6)  Bank.  Rules,  1886,  r  265. 

(c)  Ib.  r.  268. 


710  BANKRUPTCY. 

Bk.  IV.  itors,  and  are  on  the  same  footing  as  the  separate  cred- 

Chap.  4.  itors  of  any  individual  member  of  the  hrm  (d). 

' Partners  who  are  dormant  or  who  are  nominal  merely, 

Partners  who  may  be  adjudicated  bankrupt  (e).  But  there  seems  to 
may  be  adju-  ^e  a  difficulty  in  supporting  a  joint  adjudication  against 
raot  "  severa^  partners,  one  of  whom  is  dormant  and  is  only 

entitled  to  a  share  of  the  profits  ;  for  in  such  a  case 
there  is  no  joint  property  to  administer  (/).  "Where 
all  the  partners  save  one  are  dead,  the  survivor  can  be 
made  bankrupt  ;  and  although  all  the  joint  property 
may  in  one  sense  be  vested  in  him  by  survivorship,  a 
petition  filed  against  him  alone  before  his  co-partners 
died,  will  not  be  superseded  in  favour  of  a  petition  filed 
against  him  alone  since  their  death  (g). 
|  *  038]  *  "Where  a  debtor  by  or  against  whom  a  bankruptcy 

Effect  of         petition  has  been  presented  dies,  the  proceedings  are 
death  o  a       continued  as  if  he  were  alive,  unless  the  Court  other- 
wise orders  (h)  ;  and  if,  after  the  filing  of  a  petition 
against  several  persons,  one  of  them  dies,  an  adjudi- 
cation may  be  made  against  the  survivors  ;  or  if   an 
adjudication  has  already  been  made  against  them   and 
the  deceased,  it  will  be  amended  (7). 
Cases  of  two        Where  there  are  two  distinct  firms,  a  major  and  a 
liruis  with      minor  firm,  a  creditor  of  the  latter  only  may  obtain  a 

common  -joint  adjudication  against  all  the  persons  who  compose 
iKirt  Lit*  i***  j  j  <-?  j.  -t 

it  ;  although  their  co  partners  in  the  major  firm  can- 
not be  included  in  the  same  adjudication  (j).  If, 
however,  the  major  firm  is  adjudicated  bankrupt,  this 
involves  the  bankruptcy  of  the  minor  firm  ;  and  its 
creditors  can,  therefore,  obtain  payment  of  their  debts 
under  the  adjudication  against  the  major  firm,  although 
they  could  not  have  procured  such  adjudication  (k). 
Concurrent  Formerly   it  was  the  practice  for  the  creditor  of  a 

adjudica-  firm  of  several  partners  to  take  out  separate  commis- 
sions against  each  partner,  as  well  as  a  joint  commission 
against  the  whole  firm  ;  the  object  being  to  distribute 

{d)  lb.  r.  269. 

(e)  See  Ex  parte  Matthews,  3  V.  &  B.  125  :  Ex  parte  Hamper, 
17  Ves.  403.  Dormant  partners  may  be  omitted,  see  Ex  parte 
Benfleld,  5  Ves.  424. 

(  f )  See  Ex  parte  Hamper   17  Ves.  403. 

(g)  Ex  parte  Smitb,  5  Ves.  295. 

(A)  46  &  47  Vict.  c.  5:2,  \  108.  This  does  not  apply  to  debtors 
who  die  before  they  are  served,  Ex  parte  Hill  and  Hymans,  19 
Q.  B.  D.  538. 

(i)  See  Ex  parte  Hall,  De  Gex.  332. 

(,/)  Ex  parte  Chambers,  2  Mont.  &  A.  440.  and  Bernaseoni  v. 
Fairbrotlier.  ib.  441  .  see  ib.  472. 

(A-)  Ex  parte  Worthington,  3  Madd.  26.  See  Bauk.  Bules, 
1886,  r.  269. 


tions. 


tions  against 
same  person. 


THE  ADJUDICATION.  711 

the  assets  of  the  firm  under  the  joint  commission,  and  Bk.  IV. 
the  separate  assets  of  each  partner  under  the  separate  Chap.  4. 

commission  issued  against  him  (I).     The  modern  prac-    ec  '    '    „ 

tice,  however,  is  different  ;  for  now,  under  a  joint  ad- 
judication against  a  firm,  not  only  are  the  assets  of  the 
firm  distributed  amongst  its  joint  creditors,  but  the 
separate  assets  of  each  partner  are  also  distributed 
amongst  his  own  separate  creditors  (m).  Under  a  joint 
adjudication,  therefore,  everything  can  be  done  as  fully 
and  effectually  as  under  separate  adjudications  against 
all  the  members  ;  and  more  can  be  done  *  than  under  [  *  639] 
separate  adjudications  against  some  only  of  them.  For 
these,  amongst  other  reasons,  a  joint  creditor  seldom  or 
never  now  thinks  of  petitioning  for  separate  adjudi- 
cations against  all  the  partners.  If  he  is  desirious  of 
making  them  all  bankrupt,  he  petitions  for  a  joint  ad- 
judication against  the  firm  (n). 

It  used  to  be  considered  that  a  person  who  had  been  Several 
once  made  bankrupt  was  incapable  of  being  made  bank-  adjudica- 
rupt  again  unless  he  had  obtained  a  certificate  ;  and 
that  a  second  adjudication  against  him  was  utterly 
void  (o).  But  the  correctness  of  this  view  has  been 
since  denied  ;  and  it  has  been  decided  that  the  trus- 
tees under  a  second  adjudication  against  an  uncertificated 
bankrupt  are  entitled  to  recover  property  acquired  by 
him  since  the  first  adjudication  (p).  It  is,  however, 
obvious  that  inasmuch  as  all  the  property  of  a  bank- 
rupt, until  he  has  obtained  his  order  of  discharge,  may 

(?)  See  Cooke's  Bank.  Law.  13  and  14.  8th  ed.  Qu.,  how  this 
could  he  done  consistently  with  the  doctrine  that  a  person  once 
made  bankrupt  cannot,  until  he  has  obtained  his  certificate,  be 
made  bankrupt  again  ?  See,  on  this  subject,  1  Mont.  Part,  notes 
K.  &  2  B.  pp.  44  and  100,  of  the  appendix. 

(to)  The  bankruptcy  of  a  firm  is  in  fact  the  bankruptcy  of  the 
individuals  composing  it  ;  see  Graham  v.  Mulcaster,  4  Bingllo  ; 
Stonehouse  v.  De  Silva,  3  Camp.  399. 

(w)  In  Ex  parte  Gardner,  1  V.  &  B.  77.  a  creditor  of  a  firm  ob- 
tained separate  adjudications  against  all  the  partners,  but  Lord 
Eklon  evidently  disapproved  of  that  course.  But  see  Ex  parte 
Duncan,  1  Mon.  D.  &  D.  149,  and  E.v  parte  Burdikin.  2  ib.  187. 

(o)  Ex  parte  Crew,  16  Ves.  2:57;  Nelson  r.  Cherrell,  7  Bing. 
663;  Phillips  v.  Hopwood,  1  B.  &  Ad.  019;  Martin  r.  O'Hara, 
Cowp.  823  ;  Ex  parte  Proudfoot,  1  Atk.  251  ;  Ex  parte  Brown, 
and  Ex  parte  Munton,  1  V.  &  B.  60  ;  Till  v.  Wilson,  7  B.  &  C. 
090  ;  Fowler  v.  Coster,  10  ib.  427  ;  and  see  Ex  parte  Chambers, 
3  M.  &  A.  294,  and  a  note  to  Ex  parte  Welsh,  Mont.  280,  where 
all  the  eases  on  the  subject  will  be  found  collected.  See,  too,  1 
Mont.  Part,  note  K.  p.  44,  and  2  B.  p.  100.  If  there  are  two 
commissions,  and  the  first  has  never  been  acted  on.  the  second  is 
valid  :  see  Warner  v.   Barber,  8  Taunt.  176. 

(p)  Ex  parte  Watson,  12  Ch.  I).  380;  Morgan  v.  Knight,  15  C. 
B.   N.  S.  009.     See,  also,  Ex  parte  Dewhurst,  7  Ch.  185. 


712 


BANKRUPTCY. 


Bk.  IV. 
Chap.  4. 
Beet.  1. 


Joint  adjudi- 
eation  after  a 
separate  one. 


[  *  640] 

Annulling 


be  acquired  by  his  trustee  for  the  benefit  oT  his  credit- 
ors, a  second  adjudication  against  him  is  generally  of 
little,  if  any,  use  if  the  trustee  in  the  first  bankruptcy 
interferes  (q).  But  this  observation  does  not  apply  to 
the  case  of  a  partner  ;  for  in  general  it  is  much  more 
expeditious,  cheap,  and  otherwise  advantageous  to  wind 
up  the  affairs  of  partners  under  a  joint  adjudication 
against  the  firm,  than  under  one  or  more  separate  ad- 
judications against  the  members  thereof  individually. 
Consequently  joint  are  regarded  *  with  more  favour 
than  separate  adjudications  ;  and  if  a  separate  adjudi- 
adjudication.  cation  has  been  obtained  against  a  partner,  and  a  joint 
adjudication  is  afterwards  obtained  against  the  firm  to 
which  he  belongs,  the  Courts  will  give  effect  to  the  latter 
adjudication,  and  annul  the  former,  unless  in  justice  will 
result  from  so  doing,  This  course  was  first  adopted  by 
Lord  Thurlow  in  Ex  parte  Hardcastle  (?*),  and  the  ad- 
vantages of  a  more  extensive  adjudication  over  a  less 
extensive  one  were  so  great,  that  it  became  quite  a 
matter  of  course  to  annul  separate  adjudications  against 
individual  partners  where  a  valid  joint  adjudication 
against  the  firm  had  been  also  obtained  (s).  But  if  the 
joint  adjudication  was  invalid,  e.  g.,  owing  to  the  insuf- 
ficiency of  the  petitioning  creditor's  debt,  or  of  the 
evidence  showing  acts  of  bankruptcy  by  all  the  persons 
included  in  it,  or  if  there  was  no  joint  estate  worth 
mentioning,  a  prior  separate  adjudication  would  not  be 
annulled  (t).  Moreover,  although  as  a  rule,  a  sepa- 
rate adjudication  would  be  annulled  in  order  that  a 
subsequent  joint  adjudication  might  be  proceeded  with, 
this  was  only  because,  as  a  rule,  it  was  most  to  the  ad- 
vantage of  creditors  that  this  course  should  be  taken. 
The  Courts  would,  in  their  discretion,  support  which- 
ever  of  several   adjudications   allowed   most   complete 


(q)  As  to  the  relative  rights  of  the  first  and  second  sets  of  trus- 
tees, see  Ex  parte  Ford,  1  Ch.  D.  521  ;  Ex  parte  Caughey,  4  Ch. 
D.  533  ;  Ex  parte  Watson,  12  ib.  380. 

(r)  1  Cox.  397. 

(s)  Ex  parte  Pemherton,  1  M.  D.  &  D.  190.  The  eases  in  which 
joint  commissions  have  been  upheld,  and  separate  ones  super- 
seded, are  very  numerous.  The  following  are  those  most  usually 
referred  to  : — Ex  parte  Brown,  1  V.  &  B.  60  ;  Ex  parte  Rawson, 
1  V.  &  B.  100  ;  S.  C,  Ex  parte  Masson,  1  Kose.  159;  Ex  j,nrte 
Smith.  1  Gl.  &  J.  256  :  Ex  parte  Patchelor,  2  Rose.  20  ;  Ex  parte 
Burdikin,  2  M.  D.  &  D.  187  ;  Ex  parte  Digby,  1  Deac.  347.  As 
to  consolidating  the  proceedings  under  petitions  for  joint  and 
separate  adjudications  respectively,  see  Ex  parte  Mackenzie,  20 
Eq.  758. 

(0  Ex  parte  Roberts,  1  Madd.  72;  Re  Beale,  2  Dm.  &  War. 
566  ;  Ex  parte  Rennick,  12  Jur.  996. 


THE  ADJUDICATION.  713 

justice  to  be  done,  and  annul  all  the  others   (u) ;  and  Bk.  IV. 
instances  are  not  wanting  in  which  joint   adjudications  Chap. 4 .  Sect. 

have  been  annulled,  and  separate  ajdudications  allowed  J 

to  proceed  (x).      In  Re  O'Reardon  one  of  two  partners  Re  O' Rear- 
was  adjudicated  bankrupt   in   England   and  the  other  (*on- 
was  adjudicated  bankrupt  in  Ireland  ;  both  were  then 
jointly  adjudicated  *  bankrupt  in  Ireland  :   most  of  the  [  *  641] 
joint  creditors,   and  a  considerable   part  of    the  joint 
estate  were  in  England.     The  Court  in  England  de- 
clined to  order  the  joint  assets  to  be  remitted  to  Ireland 
for  distribution  there  (y). 

Again,  where  two  firms  having  a  common  partner  were  Bankrupt 
both  adjudged  bankrupt,   in  which  case   the   common  m-ms  with 
partner  was  adjudged  bankrupt  twice  over,  the  latest  of  common 
the  adjudications  was  superseded  as  to  him  (z)     It  was 
at  one  time  doubted  whether  this  could  be  done   (a); 
but  that   doubt  was  long  ago  removed,  and  there  is  a 
case  in  which  an  uQwilling  purchaser  was  compelled  to 
take  an  estate,  the  title  to  which  depended  on  this  very 
point  (aa). 

Where  a  separate  adjudication  had  been  made,  and  a  Supporting 
joint   adjudication  was   afterwards   petitioned   for,  but  one.  adjndi- 
there  was  no  sufficient  evidence  to  support  it  without  c:ltiou  °7 
having  recourse  to  what  had  been  proved  in  the  matter  i^TriotherP 
of  the  separate  adjudication,  use  was  made  of  what  had 
been  so  proved,  and  the  evidence  given  in  support  of 
the   separate  adjudication  was  ordered  to  be  produced 
in  order  that  a  joint  adjudication  might  be  made  (b). 
When  a  separate  adjudication  against  one  partner  was 
annulled  in  favour  of  a  joint  adjudication  against  him 
and  his  co-partners,  it  was  usually  expressly  declared 
in  the  annulling  order  (c)  that  all  sales  under  the  first 
bankruptcy  should  be  confirmed  and  carried  into  execu- 
tion by  the  assignees  under  the  second;  that  the  proofs 

(«)  Ex  parte  Crew,  16  Ves.  237  ;  Ex  parte  Rawson,  1  V.  &  B. 
163  ;  Ex  parte  Cridland,  2  Rose,  164. 

(x)  Ex  parte  Rowlandson,  1  Rose,  89  ;  and  see  Ex  parte  Cutten; 
Buck,  68  ;  Ex  parte  Hamper,  17  Ves.  403.  See,  too,  the  last  note 
but  one. 

(y)  Be  O'Reardon,  9  Ch.  74. 

(2)  Ex  parte  Coleman,  Mon.  &  McAr.  15;  Ex  parte  By  grave,  2 
Gl.  &.  Jam.  391. 

(a)  Ex  parte  Burlton,  2  Gl.  &  Jam.  344. 

{aa)  Burlton  v.  Wall,  Tarn.  113. 

(h)  Ex  parte  Sharp,  2  Mon.  D.  &  D.  350;  Ex  parte  Harrison,  2 
Gl.  &  J.  135.  Ex  parte  Burdekin,  1  Deac.  57,  is,  however,  op- 
posed to  these. 

(c)  See  1  lie  precedents  in  Ex  parte  Mason  or  Rawson,  1  Rose, 
428;  Re  Colbeck,  Buck,  54;  Ex  parte  Digby,  1  Hcac.  347;  Ex 
parte  Ravenscroft,  4  ib.  172. 


714 


BANKRUPTCY. 


Bk.  IV. 

Chap.  4. 
Sect.  1. 


[  *  642] 

Costs  of 
annulling. 


Annulling 
after  cer- 
tificate. 

Staying 
proceedings 
instead  of 
annulling. 

Legality  of 
annulling 
one  adjudi- 
cation to 
give  effect  to 
another. 


Modern 
practice. 


of  debts  under  the  first  should  be  considered  as  if  they 
had  been  made  under  the  second  (d);  that  all  creditors 
should  be  admitted  to  prove  under  the  second  bank- 
ruptcy; that  distinct  accounts  of  the  joint  and  separate 
estates  should  be  kept;  that  the  assignees  in  the  first 
bankruptcy  should  account  to  those  in  the  second  for 
assets  possessed  under  the  first,  and  should  allow  ac- 
tions to  *be  brought  in  their  names  by  the  assignees 
under  the  second  bankruptcy. 

The  costs  of  annulling  a  separate,  in  order  to  give 
effect  to  a  joint,  adjudication,  were  usually  borne  by  the 
joint  estate  (e). 

The  fact  that  the  bankrupt  had  obtained  his  order  of 
discharge  under  an  adjudication  did  not  prevent  such 
adjudication  from  being  annulled  (/). 

Where,  in  consequence  of  what  had  been  done  under 
an  adjudication,  it  was  inexpedient  to  annul  it,  the  prac- 
tice was  not  to  annul,  but  to  impound  it,  and  to  stay  all 
further  proceedings  under  it  (g). 

The  power  to  annul  a  prior  adjudication,  and  to  give 
effect  to  a  subsequent  one,  was  not  so  clearly  established 
at  law  as  it  was  in  bankruptcy  and  in  equity  (h). 
Hence,  an  injunction  to  restrain  the  production  at  law 
of  evidence  to  show  the  existence  of  the  annulled  bank- 
ruptcy, would,  if  necessary,  be  granted  (i).  However, 
in  one  case  where  an  action  was  brought  by  assignees, 
and  a  verdict  was  obtained  by  them,  but  a  petition  for 
superseding  their  commission  was  pending,  the  Court 
of  King's  Bench,  on  the  application  of  the  defendant, 
stayed  execution,  and  ordered  that  the  amount  recov- 
ered shotdd  be  paid  into  Court  (k). 

It  has  been  considered  desirable  thus  to  refer  to  the 


(d)  See  Ex  parte  Bateson,  1  M.  D.  &  D.  500. 

(e)  Ex  parte  Duncan,  1  M.  D.  &  I).  149;  Ex  parte  Burdikin,ib. 
531;  Ex  parte  Sharp,  2  ib.  531;  Ex  parte  Peat,  ib.  788.  See.  too, 
Ex  parte  Morris,  10  Jur.  1018,  where  an  invalid  adjudication 
against  three  persons  was  annulled  to  give  effect  to  a  subsequent 
adjudication  against  two  of  them. 

{/)  Ex  parte  Cutten,  Buck,  68;  Ex  parte  Eowlandson,  1  Kose, 
89:  Ex  parte  Gillam.  2  Cox,  193;  Ex  parte  Poole,  ib.  ±27. 

(//)  See  Ex  parte  Tobin,  1  V.  &  B.  308:  Ex  parte  Rowlandson, 
1  Rose,  416;  Re  Col  beck.  Buck,  54;  Ex  parte  Digby,  1  Deac.  347; 
Ex  parte  Ravenscroft,  4  Deac.  172;  Ex  parte  Lister,  3  ib.  516. 

{h)  Butt  v.  Bilke,  4  Price,  241;  and  2  Rose,  171  note,  and  see 
Lord  Eldon's  observations  in  Ex  parte  Lees,  16  Ves.  472,  and  in 
Ex  parte  Cridland,  2  Rose,  167;  and  see  1  Mont.  Part.  51  and  52, 
notes. 

(i)  Ex  parte  Thompson,  1  Rose,  285.  The  fact  that  an  adjudi- 
cation has  been  annulled,  can  now,  it  is  apprehended,  be  set  nf 
as  defence  without  difficulty. 

[k)  Hodgiuson  v.  Travers,  1  B.  &  C.  257. 


THE  ADJUDICATION.  715 

_ier  practice,  because,  although  the  Bankruptcy  act,  Bk.  IV. 
jSS,  does  not  contain  any  express  provision  for  annul! -  ^  ap" 

mg  or  superseding   *  a  separate  in   favour  of  a  joint k '       

adjudication,   circumstances   may    arise   which   render  [*  643] 
suet  a  proceeding  desirable;  and  as  the  old  practice  is 
preserved,  the  previously  established  rules  on  this  sub- 
ject will  probably  not  be  disregarded  (I). 

Under  the  Bankruptcy  act,  1883,  an  adjudication  may  Grounds  for 
be  annulled  if  the  Court  is  of  opinion  that  the  debtor  annulling  an 
ought  not  to  have  been  adjudged  bankrupt,   or  if  his  adjudication, 
debts  have  been  paid  in  full  (vi);  but  no  other  ground 
for  annulling  an  adjudication  is  expressly  mentioned. 
But  the  general  power  to  stay  and  consolidate  proceed- 
ings is  probably  sufficient  for  most,  if  not  all  practical 
purposes  (n ). 

The  consequences  of  annulling  an  adjudication  are 
stated  in  §  35  (2)  to  be  as  follows: — 

\  35. — (2. )  Where  an  adjudication  is  annulled  under  this  sec-  Conse- 

tion  all  sales  and   dispositions  of  property  and  payments  duly  quences  ot 

made,  and  all  acts  theretofore  done,  by  the  official  receiver,  trus-  iuinu    1U8  ot 

'  J  .  adjudica- 

tee,  or  other  person  acting  under  their   authority,   or  by  the  ^011 . 

Court,  shall  be  valid,  but  the  property  of  the  debtor  who  was  ad- 
judged bankrupt  shall  vest  in  such  person  as  the  Court  may  ap- 
point, or  in  default  of  any  such  appointment  revert  to  the  debtor 
for  all  his  estate  or  interest  therein  on  such  terms  and  subject  to 
such  conditions,  if  any,  as  the  Court  may  declare  by  order  (o). 

By  the  Bankruptcy   act,  1883,  §  106,  it   is   enacted 
that 

Where  two  or  more  bankruptcy  petitions  are  presented  against  Consolida- 
the  same  debtor  or  against  joint  debtors,  the  Court  may  consoli-  tion  of  pro- 
date  the  proceedings,  or  airy  of  them,  on  such  terms  as  the  Court  cee°-mgs. 
thinks  fit. 

It  is  therefore  to  be  inferred  that,  under  the  present 


(/)  See  Bank  Rules,  1886,  r.  353;  Ex  parte  Claxton,  7  Ch.  532; 
and  infra,  p.  6G6. 

(m)  46  &  47  Vict.  c.  52,  \  35. 

(n)  See  \\  106,  109;  and  as  to  annulling  and  adjudication  ob- 
tained viuhi  fide  to  dissolve  a  partnership,  see  ante,  p.  636. 

(o)  See,  on  the  corresponding  section  of  the  Act  of  1869,  West 
v.  Baker,  1  Ex.  D.  44;  Bailey  v.  Johnson,  L.  R.  7  Ex.  2<>::.  and 
6  ib.  269.  Under  the  old  law  the  effect  of  annulling  an  adjudi- 
cation depended  upon  the  cause  for  which  it  was  annulled.  !l' 
annulled  upon  the  ground  that  it  ought  never  to  have  been  made, 
then,  speaking  generally,  everything  done  under  it  was  invalid; 
but  if  annulled  upon  some  other  ground,  then  the  annulment 
had  no  retrospective  effect.  Sec  Smallcombe  v.  Olivier,  13  M.  & 
W.  77:  and  Buck,  260,  in  the  note.  Compare  Ex  parti  Milner, 
i:i  Ves.  204;.  Gould  v.  Shoyer,  6  Bing.  738. 


716  BANKRUPTCY. 

Bk.  IV.  as  under  the  old  law,  if  separate  adjudications  are  ob- 

Chap.  4.  tained  *  against  all  the  members  of  a  tirm,  the  sepa- 

Sect-  L  rate  adjudications  may  be  consolidated  and  prosecuted 

[  *644]  as  if  there  were  a  joint  adjudication  (p);  and  if  there 
is  also  a  joint  adjudication,  an  order  may  be  obtained 
consolidating  them  all,  and  staying  further  proceedings 
under  the  separate  adjudications  (q).  So,  if  two  firms 
are  separately  adjudged  bankrupt,  the  two  adjudica- 
tions will  be  consolidated  and  prosecuted  as  one,  if  so 
to  do  will  be  for  the  benefit  of  the  creditors  of  both 
firms  (r). 

By  the  Bankruptcy  act,  1883,  it  is  also  enacted  by  § 
112 'that 

^  r         3  112.  Where  a  receiving  order  has  been  made  on  a  bankruptcy 

Propertv  of        *  °        ,         „  .  .  ,, 

partners  to      petition  against  or  by  one  member  of  a  partnership,  any  other 

be  vested  in  bankruptcy  petition  against  or  by  a  member  of  the  same  part- 
same  trustee.  nership  shall  be  filed  in  or  transferred  to  the  Court  in  which  the 
first-mentioned  petition  is  in  course  of  prosecution,  and,  unless 
the  Court  otherwise  directs,  the  same  trustee  or  receiver  shall  be 
appointed  as  may  have  been  appointed  in  respect  of  the  property 
of  the  first-mentioned  member  of  the  partnership,  and  the  Court 
may  give  such  directions  for  consolidating  the  proceedings  un- 
der the  petitions  as  it  thinks  just. 

Under  this  section  it  would  probably  be  held,  as  it 
was  under  the  older  law,  that  if  there  is  a  separate  ad- 
judication against  one  partner,  and  a  joint  adjudica- 
tion against  his  co- partners,  either  with  him  or  with- 
out him,  the  joint  adjudication  will  be  ordered  to  be 
prosecuted  with  the  separate  adjudication  (s). 

4.   Choice  of  trustee. 

Separate  creditors  cannot  vote   in  the  choice  of  a 
trustee  under  a  joint  adjudication  (t);    but  joint  cred- 
it) Be  Gowar,  1  M.  D.  &  D.  1. 

{q)  Ex  parte  Lister,  Mon.  &  Ch.  2G0;  Ex  parte  Mackenzie,  20 
Eq.  758. 

(r)  See  in  Harris  v.  Fanvell,  13  Beav.  403;  Ex  parte  Grylls,  12 
Jur.  171,  a  firm  trading  in  one  district  was  adjudicated  bank- 
rupt in  another  where  one  of  the  partners  resided.  The  proceed- 
ings were  removed  from  the  latter  to  the  former  district. 

(s)  See  Ex  parte  Mackenzie.  20  Eq.  758;  Ex  parte  Green,  3  De 
G.  &  J.  50;  Ex  parte  Haines,  ib  58;  Be  Simmons,  2  M.  D.  &  D. 
603.     See,  also,  the  last  note. 

(t)  Ex  parte  Parr,  1*  Yes.  65;  Ex  parte  Jepson,  19  Yes.  224; 
Ex  parte  Hamer,  1  Rose.  321.  These  cases  were  all  decided  long 
before  the  passing  of  the  present  Bankrupt  act,  but  they  are  gen- 
erally understood  to  be  in  accordance  with  the  present  state  of 
the  law. 


CHOICE  OF  TRUSTEES.  717 

itors  are  entitled  *  to  vote  in  the  choice  of  a  trustee  un-  [  *  645] 
der  a  separate  adjudication  (u).  **k.  IV. 

If  a  separate  is  annulled  in  favour  of  a  joint  adjudi-  U»ap-4.bect 
cation,  the  separate  creditors  lose  their  right  to  vote  in  J 
the  choice  of  a  trustee  ;  but  this  has  been  decided  not  Effect  of 
to  be  a  sufficient  reason  for  preserving  the  first  adjudi-  ^j^|™!on. 
cation  (x). 

Upon  a  joint  adjudication  against  a  firm  the  trustee 
appointed  by  the  joint  creditors  is  the  trustee  of  the 
separate  estates.  But  each  set  of  separate  creditors 
may  appoint  its  own  committee  of  inspection  ;  in  default 
of  such  appointment  the  committee  (if  any)  appointed 
by  the  joint  creditors  is  deemed  to  be  appointed  by  the 
separate  creditors  also.  See  Bank.  Rules,  1886,  r. 
268. 

"Under  the  old  practice,  where  there  was  a  joint  ad-  Appointment 
judication,  and  assignees  had  been  chosen  by  the  joint  jj1"^^1-8 
creditors  (y),  and  the  separate  creditors  of  one  of  the  the  separate 
bankrupts  could  show  that  their  interests  required  it,  creditors, 
they  were  allowed  to  appoint  an  inspector  of  the  sepa- 
rate estate  of  the  bankrupt  in  question  ;  and  the  in- 
spector appointed  was  empowered  to  collect,  and  get  in, 
such  separate  estate,  and  to  use  the  names  of  the  as- 
signees for  that  purpose,  indemnifying  them  against 
the  costs  of  proceedings  taken  in  their  names  ;  he  was 
also  directed  to  pay  what  he  received  into  such  bank  as 
the  separate  creditors  might  select ,  and  was  authorised 
to  inspect,  and  take  copies  of,  all  books  and  documpnts 
in  the  possession  of  the  assignees,  and  relating  to  the 
separate  estate  (z).     The  costs  of  obtaining  an  *  order  [  *  646] 
for  liberty  to   choose  an   inspector,  and  also  the  costs, 
charges,  and  expenses,  properly  incurred  by  him  in  the 
execution  of  his  duties,  were  borne  by  the  estate  to  pro- 

(«)  46  &  47  Viet.  c.  52,  Sched.  1,  §  13.  A  firm  may  vote  by 
any  of  its  members,  46  &  47  Viet.  c.  52,  §  148.  A  corporation 
votes  by  an  officer  appointed  under  its  common  seal,  ib.  Com- 
panies empowered  to  sue  by  public  officers  vote  by  them  or  by 
attorneys  appointed  by  them,  *ee  Bank.  Rules,  1886,  r.  245,  and 
forms,  and  r.  258;  Ex  parte  Ackroyd,  1  M.  D.  &  D.  555:  and  the 
appointment  of  the  attorney  need  not  be  under  seal,  Naylor  v. 
Mortimore,  17  C.  B.  N.  S.  207. 

(ar)  See  Ex  parte  Pachelor,  2  Rose,  26. 

\y)  Be  Daintry,  2  M.  D.  &  D.  257,  shows  that  leave  to  appoint 
an  inspector  would  not  be  granted  before  the  assignees  were 
chosen  ;  and  Ex  parte  Holford,  ib.  485,  shows  that  liberty  to  ap- 
point an  inspector  would  not  be  refused  simply  because  there 
was  no  imputation  against  the  assignees. 

\z)  Bee  Exparte  Wright,  2  M.  D.  &  D.  434  ;  Ex  parte  Wilson.  1 
ib.  310  ;  Ex  parte  Dawson,  3  D.  &  C.  12  ;  Ex  parte  Batson.  1  Gl. 
&  J.  269  ;'  Exparte  Miles,  2  Rose,  68  ;  .E^wWeBasarro,  1  ib.  266. 


718 


BANKRUPTCY. 


Bk.  IV. 

Chap.  4. 
Sect.  2. 


tect  which  he  was  appointed  (a).  A  similar  course  was 
pursued  where  there  was  no  joint  adjudication,  but  where 
the  joint  creditors  had  appointed  the  assignees,  and  the 
interests  of  the  separate  creditors  required  protection  (6). 
The  present  rule  268  will,  however,  probably  render 
it  unnecessary  to  have  recourse  to  this  practice  except 
under  very  special  circumstances. 


Property 

vesting  in 
trustee. 


Property 
vesting  in 
the  trustee 
of  a  bank- 
rupt firm. 


[*647] 


Section   II. — The    Property  Which  Vests    in    the 
Trustee,  and  the  Consequences  of  Such  Vesting. 

1.   Generally. 

Speaking  generally,  it  may  be  said,  that  when  a  per- 
son is  adjudicated  bankrupt,  all  property,  both  real  and 
personal,  to  which  he  is  then  beneficially  entitled,  or  to 
which  he  becomes  beneficially  entitled  before  he  obtains 
his  order  of  discharge,  vests  in  his  trustee,  for  the  bene- 
fit of  his  creditors  (c). 

When  a  firm  of  partners  is  adjudicated  bankrupt,  or 
when  a  joint  adjudication  is  made  against  two  or  more 
partners,  all  the  joint  property  of  the  bankrupts,  as 
well  as  all  the  separate  property  of  each  of  them,  vests 
in  the  trustee  (cl).  Moreover,  their  joint  property  vests 
in  the  trustee,  as  juint  property,  and  without  reference 
to  the  equality  or  inequality  of  the  bankrupt's  shares 
therein  (e). 

Before  the  Judicature  acts,  when  each  of  the  mem- 
bers of  a  firm  was  separately  adjudged  bankrupt,  the 
trustees  of  them  all,  could  not  recover,  in  one  action, 
debts  due  to  the  firm,  and  *  also  debts  due  to  the  part- 
ners separately.  The  trustee  of  each  partner  must 
have  sued  alone  for  the  recovery  of  debts  due  to  him 
only  (/).  But  probably  it  would  be  held  otherwise 
now  if  expedient  (g). 

(a)  Ex  parte  Holford,  2  M.  D.  &  D.  485,  and  see  the  cases  in 
the  last  note. 

(b)  Ex  parte  Melbourne,  6  Ch.  835. 

(c)  46  &  47  Vict.  c.  52,  \\  20  (1),  44,  54. 

{(I)  Bank.  Pules,  1886,  r.  268  ;  Exparte  Cook.  2  P.  W.  500  ; 
Hague  v.  Pollston,  4  Burr.  2176;  Bolton  v.  Puller.  1  Bos.  &  P. 
539  ;  Graham  v.  Mulcaster,  4  Bing.  115.  So  under  the  Indian 
Insolvency  act,  11  &  12  Vict.  c.  21,  Brown  v.  Carbery,  16  C.  B. 
N.  S.  2. 

(e)  Exparte  Hunter,  2  Rose.  382. 

(/)  See  Hancock  v.  Haywood,  3  T.  R.  433  ;  and  as  to  the  dec- 
laration in  an  action  by  several  sets  of  assignees  for  the  recovery 
of  a  joint  debt,  see  Ray  v.  Davies,  8  Taunt.  134. 

(g)  See  Jud.  Rules,  1883,  Ord.  xvi.  rr.  1,  4.  6  ;  and  Ord.  xviii. 
rr.  1,  3,  6. 


PROPERTY  VESTING  IN  TRUSTEES.  719 

"When  one  of  several  partners   is   adjudicated  bank-  Bk.  IV. 
rupt  his  trustee  becomes   entitled   to  all  his   separate  ^nap.  4.  Sec+. 

property,  and  to  all  his  interest  in  the  joint  property  (h);  1 

but  subject  to  the  qualification  alluded  to  below  ( p.  653),  Property 
the  trustee  can  claim  no  more  than  the  bankrupt  him-  vestniS  "J 
self  would  have  been  entitled  to,  had  he  not  become  bankrupt 
bankrupt ;  and  every  lien  available  for  his  co-partners  partner, 
against  him  is  equally  available  for  them  against  his 
trustee  (i).  Consequently  the  trustee  can  claim  noth- 
ing as  the  bankrupt's  share  until  all  the  joint  creditors 
have  been  paid  (&),  and  the  partnership  accounts  have 
been  duly  taken  and  adjusted  (I).  On  the  other  hand, 
the  solvent  partners  have  no  right  to  insist  on  taking 
the  partnership  assets  to  themselves,  and  to  pay  the 
trustee  the  estimated  value  of  the  bankrupt's  share  ;  for 
the  right  of  the  trustee  against  them,  as  well  as  their 
right  against  the  trustee,  is  to  have  an  account,  and  a 
sale  and  distribution  (m).  In  one  case  it  was  even  de- 
cided, that  a  stipulation  in  the  articles  of  partnership 
to  the  effect  that,  on  the  bankruptcy  of  one  of  the  part- 
ners, his  share  should  be  taken  by  the  others  at  a  valu- 
ation, was  not  binding  on  the  assigeees  (n);  but  the 
circumstances  of  the  case  were  somewhat  peculiar  ;  and 
there  seems  no  reason  why  such  a  stipulation  should 
necessarily  be  ineffectual. 

*  In  Whitmore  v.  Mason  (o),  partnership  articles  con-  [  *  648] 
tained  a  provision  that,  on  the  bankruptcy  of  a  partner,  Whitniore  v, 
an  account  should  be  taken  and  a  valuation  made  of  Mason, 
his  share  and  interest  in  the  partnership  property,  with 
the  exception  of  a  particular  lease.     It  was  held  that 
this  exception  was  void,  as  against  the  assignees  of  a 
partner  who  had  become  bankrupt,  and  that  they  were 
entitled  to  his  share  in  the  lease.     The  provision  as  to 
valuing    the  bankrupt's    share    was  not  sought  to  be 
avoided  by  the  assignees. 

Upon  principles  which  have  already  been  discussed,  Profits 

(h)  The  trustee  can,  with  the  leave  of  the  Court,  sue  for  a  joint 
debt  in  the  names  of  the  trustee  and  of  the  bankrupt's  partner, 
46  &  47  Vict.  c.  52,  g  113. 

((")  See  Anon.,  3  Salk.  61,  and  12  Mod.  446;  Fox  v.  Hanbury, 
Cowp.  445  ;  West  v.  Skip,  1  Ves.  S.  239  ;  Bolton  v.  Puller,  1  Bos. 
&  P.  548  ;  1  Mont.  Part.,  note  P.,  p.  66. 

(k)  Taylor  v.  Fields,  4  Ves.  396;  Holderness  v.  Shackels,  8  B. 
&  C.  612  ;  Richardson  v.  Gooding,  2  Vern.  293  ;  Ex  parte  Terrell, 
Buck,  345  ;  Gross  v.  Dusfresnay,  2  Eq.  Ab.  110,  pi.  5. 

(I)  See  West  v.  Skip,  1  Ves.  S.  239,  456. 

(m)  Crawshay  v.  Collins,  15  Ves.  229  ;  Wilson  v.  Greenwood,  1 
Swanst.  471. 

(n)  Wilson  v.  Greenwood,  1  Swanst.  471. 

(o)  2  J.  &  H.  201. 


720 


BANKRUPTCY. 


Bk.  IV. 
Chap.  4.  Sect. 
Sect.  2. 

accruing 
subsequently 
to  bank- 
ruptcy. 
Right  of 
trustee  to 
account  from 
the  executors 
of  a  deceased 
partner. 

Trustee  does 
not  become 
partner. 


[  *  649] 


Bankruptcy 
a  cause  of 
dissolution. 


the  trustee  of  a  bankrupt  partner  is  entitled  to  an  ac- 
count, not  only  of  the  assets  as  they  stood  at  the  time 
of  the  dissolution  of  the  firm,  but  also  of  the  profits 
subsequently  made  by  the  employment  of  the  bank- 
rupt's capital  in  the  partnership  business  (p). 

Where  there  is  a  fiim  of  two  partners,  and  one  part- 
ner dies,  and  the  other  becomes  bankrupt,  the  trustee 
of  the  latter  is  entitled  to  maintain  an  action  on  behalf 
of  himself  and  all  the  other  creditors  of  the  deceased 
against  his  executors,  for  the  administration  of  his  es- 
tate, and  for  payment  of  what  may  be  due  therefrom  to 
his  surviving  partner  (q). 

The  trustee,  it  will  be  observed,  does  not  become  a 
co-partner  with  the  solvent  partners.  Like  purchasers 
from  the  sheriff  under  an  execution  against  one  part- 
ner, the  trustee  and  the  solvent  partners  become  ten- 
ants in  common  of  the  real  and  personal  p  operty  be- 
longing to  the  firm  (r).  Moreover,  as  the  sheriff,  in  the 
case  of  an  execution  against  one  partner,  is  entitled  to 
seize  the  whole  of  the  partnership  property  so  the 
*  messenger  of  the  Court  in  Bankruptcy,  in  the  case  of 
an  adjudication  against  one  partner,  is  in  strictness  en- 
titled to  put  a  person  in  possession  of  the  whole  of  the 
property  of  the  firm.  This,  however,  is  seldom  done, 
as  the  solvent  partners,  either  by  consent,  or  through 
the  intervention  of  the  Court,  make  arrangements  for 
securing  to  the  trustee  payment  of  the  bankrupt's  share 
in  the  assets  of  the  firm  (s). 

When  one  partner  only  is  adjudged  bankrupt,  the 
firm  is  thereby  nevertheless  dissolved  (t).  If  it  were 
not,  the  solvent  partners  would  have  forced  upon  them 
as  co-partners,  persons  with  whom  they  had  never 
agreed  to  be  in  partnership  ;  a  result  which  would  be 
contrary  to  the  fundamental  principle  that  partnership 

(p)  See  ante,  p.  526,  Crawshay  r.  Collins,  15  Ves.  218,  1  J.  & 
W.  267,  and  2  Euss.  325  ;  Smith  v.  De  Silva,  Cowp.  469.  This 
last  case  seems  at  first  sight  to  be  opposed  to  the  existence  of 
that  lien  which  is  above  stated  to  be  available  against  the  trus- 
tee. But  the  question  before  the  Court  was  simply  whether  the 
assignees  had  a  right  to  share  profits  accruing  since  the  bank- 
ruptcy, and  Lord  Mansfield  very  properly  held  that  they  had. 
His  judgment  certainly  shows  that  he  considered  the  assignees 
were  entitled  to  those  profits  without  paying  what  wasdue  from 
the  bankrupt  to  his  co-partners  ;  but  on  this  point  the  case  can- 
not, it  is  conceived,  be  supported.     See  8  B.  &  C.  618. 

(q)  See  Addis  v.  Knight,  2  Mer.  119. 

(/)  See  Fox  v.  Hanbury,  Cowp.  445. 

(s)  A  sale  of  the  share  to  them  need  not  be  by  auction,  Be 
Motion,  9  Ch.  192. 

(t)  Fox  v.  Hanbury,  Cowp.  448  ;  Ex  parte  £mith,  5  Ves.  297,  1 
Mont.  Part,,  note  E.,  p.  22. 


PROPERTY  DIVISIBLE  AMONGST  CREDITORS.  721 

cannot  subsist  between  any  persons  save  by  the  mutual  Bk.  IV. 
consent  of  them  all.     The  bankruptcy  of  one  partner,  Chap.  4.  Sect. 

moreover,  dissolves  the  firm,  not  only  as  to  him,  but  as  J 

to  all  the  other  co-partners,  inter  se  (u);  for,  in  the  first 
place,  a  partnership,  being  a  mere  assemblage  of  per- 
sons bound  together  by  contract,  loses  its  identity,  as 
much  by  the  bankruptcy,  as  by  the  death,  of  one  of 
those  persons  ;  and  in  the  next  place,  such  is  the  law 
of  this  country,  that  the  share  of  a  bankrupt  partner 
cannot  be  ascertained,  save  by  taking  the  accounts  of 
the  whole  firm,  and  distributing  its  clear  assets  amongst 
the  solvent  partners  and  the  trustee  of  the  bankrupt 
partner. 

As  on  the  bankruptcy  of  one  only  of  several  part-  Jurisdiction 
ners  the  joint  assets  do  not  vest    in  his    trustee,  anofCourtof 
action  in  the  Chancery  Division  to  ascertain  the  share    ^n  7*-    cy 
of  the  bankrupt  was  formerly  necessary  (x),  but  now  share, 
the  Court   in  Bankruptcy     can   itself   ascertain    such 
share  (y). 

The  doctrine  that  on  the  bankruptcy  of  one  member  RUie  as  to 
of  a  firm  the  whole  firm  is  dissolved,  is   not,  it  seems,  companies, 
applicable  to  *  mining  partnerships  (z);  and  although  [  *  650] 
the  bankruptcy  of  a  shareholder  in  an  unincorporated 
company  with   transferable  shares    may    dissolve   the 
company  as  to  him  (a),  it  is  conceived  that  such  bank- 
ruptcy does  not  dissolve  it  as  to  the  other  shareholders 
inter  se. 

2.  Property  divisible  amongst  the  creditors. 

It  is  not  proposed  in  the  present  treatise  to  enter 
minutely  into  the  details  of  the  law  respecting  the 
property  which,  in  the  event  of  bankruptcy,  vests  in 
the  trustee,  or  may  be  made  available  by  him  for  the 
benefit  of  the  creditors  ;  it  will  be  sufficient  to  call 
attention  to  the  short  effect  of  the  Bankruptcy  act, 
1883,  on  this  subject  and  then  to  allude  to  the  compli- 
cated questions  which  arise  from  the  doctrines  of  set- 
off and  mutual  credit,  the  relation  back  of  the  title  of 
the  trustee  and  of  reputed  ownership. 

(m)  See  Hague  v.  Rolleston,  4  Burr.  2174  ;  Fox  v.  Hanbury, 
Cowp.  418  ;  Crawshay  v.  Collins,  15  Ves.  228. 

(»)  See  Be  Motion,  9  Ch.  192  ;  Morley  v.  White,  8  Ch.  211  ; 
Ex  parte  Gordon,  ib.  555  ;  Ex  parte  Rumboll,  G  Ch.  842  ;Ex  parte 
Anderson,  5  Ch.  473;  Ex  parte  Sheriff  of  Middlesex,  12  Eq.  207. 

(y)  See  4G  &  47  Vict.  c.  52,  \\  93  and  102,  but  as  to  County 
Courts,  see  the  \  102. 

(z)  Ex  parte  Broadbent,  1  Mont,  &  A.  638  ;  BentleyV  Bates,  4 
Y.  &  C.  Ex.  190.     $ed  qusere  if  the  mine  is  a  partnership  assets. 

(a)  Greenshield's  case,  5  De  G.  &  S.  599. 

*  23   LAW   OF    PARTNERSHIP. 


722 


BANKRUPTCY. 


Bk.  IV. 
Chap.  4. 
Sect.  2. 


Property 
vesting  in 
trustee. 


[  *  651] 


Lands. 


Chattels. 


On  adjudication  the  property  of  a  bankrupt  vests  in 
the  trustee  (6),  i.  e.,  the  official  receiver,  until  a  trustee 
is  appointed,  and  in  the  trustee  when  appointed  (c). 
The  title  of  the  trustee  relates  back  to  the  act  of  bank- 
ruptcy on  which  the  receiving  order  is  made  ;  or  to  the 
earliest  act  of  bankruptcy  committed  within  three 
months  before  the  presentation  of  the  petition  (d). 
Until  adjudication  the  property  of  a  bankrupt  con- 
tinues vested  in  him,  subject  to  be  divested  retrospec- 
tively upon  adjudication.  But  the  moment  a  receiving 
order  is  made  the  official  receiver's  powers  and  duties 
as  a  receiver  commence  (e),  so  that  the  debtor  cannot 
properly  deal  with  his  property,  although  it  is  not  yet 
divested  from  him. 

The  property  which  on  adjudication  vests  in  the 
trustee  is  enumerated  in  §§  44  and  168  of  the  act. 
It  includes  : — 

1.  All  the  bankrupt's  property,  both  real  and  per- 
sonal, except  his  tools,  clothes  and  bedding  to  the  value 
of  20Z.; 

*2.  The  right  to  exercise  all  powers  which  he  could 
(but  for  his  bankruptcy)  exercise  for  his  own  benefit, 
except  the  right  to  nominate  to  a  vacant  living; 

3.  All  goods  in  his  possession,  order  or  disposition 
in  his  trade  or  business  as  reputed  owner  and  by  the 
consent  and  permission  of  the  true  owner.  Trade  debts 
are  goods  within  the  meaning  of  this  rule,  but  no  other 
chose s  in  action  are  so. 

Onerous  property  vests  in  the  trustee  (ee);  but  may 
be  disclaimed  by  him  in  writing  within  three  months 
after  the  first  appointment  of  a  trustee  (/). 

Ofdinary  freehold  estates,  to  which  the  bankrupt  is 
entitled  for  life,  or  in  fee,  vest  in  his  trustee,  subject  to 
such  mortgages  or  charges  as  may  affect  them  (g). 
Lands  of  which  a  bankrupt  is  seised  in  tail,  do  not, 
strictly  speaking,  vest  in  his  trustee;  but  such  lands 
may  be  disposed  of  for  the  benefit  of  his  creditors  (h); 
and  a  similar  observation  applies  to  the  bankrupt's 
copyhold  property  (i). 

The  personal  property  of  a  bankrupt,  including  all 

(b)  40  &  47  Vict.  c.  52,  U  54  and  20  (1).  (c)  \  54  (1,  2,  3). 

(d)  8  43.  (e)  I  9.  (ee)  j|44.  ( /)  155. 

\g)  Where  land  is  devised  to  a  trader  charged  with  a  sum  of 
money  which  is  allowed  to  remain  on  the  security  of  the  land, 
his  trustee  can  only  claim  the  land  subject  to  the  charge.  See 
Ex  pa ric  Forster,  1  M.  D.  &  D.  418.  and  2  ib.  177,  under  the 
name  Hudson  v.  Forster.     See,  too,  Ex  parte  Barflf,  De  Gex,  613. 

(h)  40  &  47  Vict.  c.  52,  \  56,  cl.  5. 

(i)   \  50,  cl.  4. 


PROPERTY  DIVISIBLE  AMONGST  CREDITORS.  723 

trade  debts  owing  to  him,  also  vests  in  his  trustee  (k),  Bk.  IV. 
subject  to  such  charges  and  incumbrances  (7)  as  exist  ^  ^P"„ 4' 
thereon.     But  this  is  qualified  by  the  doctrine  that,  if  '" 
the  bankrupt  is  in  trade  or  business,  his  goods  and 
chattels,  if  allowed  by  the   person  to  whom  they   are 
pledged  to  remain  in  the  bankrupt's  possession,  will, 
by  virtue  of  the  doctrines  of  reputed  ownership,  be  dis- 
tributable as  part  of  the  bankrupt's  estate,  as  if  they 
were  his  absolutely  (m). 

*  The  trustee  is  also  entitled  to  the  benefit  of  con-  [  *652] 
tracts  made  with  the  bankrupt  for  valuable  considera- 
tion (n). 

Where  chattels  purchased  by  the  bankrupt  have  ac- 
tually come  to  his  possession,  they  pass  to  his  trustee, 
although  he  may  not  have  paid  for  them;  but  if  they 
have  not  come  to  his  possession,  the  seller  can  retain 
them,  or  stop  the  delivery  of  them  until  their  price  is 
paid  (o). 

No  person  is  entitled  as  against  the  trustee  to  with-  Books  of 
hold  possession  of  the  books  of  account  of  the  bank-  account, 
rupt,  or  to  claim  any  lien  thereon  (p). 

The  trustee  may  sell  the  good-will  of  the  business  of  Debts,  g  o<l- 
the  bankrupt,  and  the  book  debts  due  or  growing  due  will,  &c. 
to  him,  and  may  transfer  the  same  to  any  person  or 
company  (q). 

Shares  belonging  to  the  bankrupt  vest   in   his   trus-  shares, 
tee  (r);  but  he  may  sell  them  (s),  or  disclaim  them  (t) 
without  becoming  a  shareholder  himself.     But  he  has 

(k)  \\  44,  54,  and  168.  Debts  owing  to  the  bankrupt  by  a 
person  to  whom  he  is  indebted,  are  subject  to  set-off,  as  will  be 
seen  hereafter.  As  to  how  far  the  trustee  is  bound  by  contracts 
entitling  others  to  use  the  bankrupt's  goods,  see  Ex  parte  Barter, 
26  Ch.  D.  510.     • 

(1)  The  Bills  of  Sale  act  must  be  borne  in  mind,  but  it  has  no 
special  bearing  on  partners.  A  bill  of  sale  given  by  two  part- 
ners, one  of  whom  only  became  bankrupt,  was  held  void  as  to  his 
interest  only,  in  Ex  parte  Brown.  9  Ch.  D.  389. 

(m)  See  Jones  v.  Gibbons,  9  Ves.  407,  and  see  infra. 

(»)  See  Beckham  v.  Drake.  2  H.  L.  C.  579;  Valpv  r.  Oakeley, 
16  Q.  B.  941;  Whitmore  v.  Gilmour,  12  M.  &  W.  80*8. 

(o)  See,  as  to  stonpage  in  transitu,  Lickbarrow  v.  Mason,  1- 
Sm.  L.  C. 

O)  Bank.  Rules,  1886,  r.  349.  The  trustee  of  one  bankrupt 
partner  cannot  take  the  books  from  the  solvent  co-partners,  Ex 
parte  Finch,  1  D.  &  Ch.  274. 

(q)  46  &  47  Vict.  c.  52,  \  56  (1);  Kitson  v.  Hardwick.  L.  R.  7 
C.  P.  473;  as  to  a  sale  of  the  share  of  a  bankrupt  partner,  see  lie 
Motion,  9  Ch.  192.  As  to  sale  of  good-will,  Walker  v.  Mottram, 
19  Ch.  D.  355. 

(r)  lb.  %  44,  54,  and  168. 

(s)  lb.  \  50,  cl.  3. 

\t)  lb.  \  55. 


724  BANKRUPTCY. 

Bk.  IV.  a  right  to  have  them  registered  in  his  own  name  (u), 

Chap.^4.  unless  the  company's  regulatiofts  contain  some  clause 

__LZ1 inconsistent  with  such  right  (x). 

Trust  Property  held  by  the  bankrupt  in  trust  for  any  other 

property.  person  does  not  vest  in  the  bankrupt's  trustee  (y). 
Consequently,  if  a  debtor  assigns  a  debt  before  he  be- 
comes bankrupt,  an  action  for  the  recovery  of  that  debt 
must  be  brought  in  his  name,  or  in  the  name  of  the 
person  to  whom  it  has  been  assigned,  as  the  case  may 
be  (z).  The  trustee  has  no  interest  in  such  a  debt, 
[  *653]  *  and  cannot  sue  for  it  (a).  It  has  been  already  ob- 
served, that  a  debtor  who,  in  contemplation  of  bank- 
ruptcy, restores  to,  or  sets  apart  for  his  cestui  que  trust 
that  which  is  vested  in  himself  merely  as  a  trustee, 
does  not  commit  an  act  of  fraudulent  preference  (£>); 
and  if  a  bankrupt  has  had  property  entrusted  to  him 
for  a  particular  purpose,  his  trustee  must  apply  it  to 
that  purpose  (c);  and  if,  being  unable  to  accomplish 
it,  the  bankrupt  has  returned  the  property,  his  trustee 
cannot  recover  it  (d). 
Trustee  It  is  not  unusually  said  that  the  trustee  represents 

stands  in  the  the  bankrupt,  and  has  no  more  extensive  rights  against 
place  of  the  third  persons  than  the  bankrupt  himself  would  have 
L>  '  had  if  he  had  continued  solvent:  but  this  proposition 
is  much  too  general.  It  cannot  be  relied  upon  as  re- 
gards property  affected  by  the  doctrines  of  reputed 
ownership,  nor  as  regards  acts  done  by  the  bankrupt 
since  the  commission  by  him  of  an  act  of  bankruptcy, 
nor,  as  regards  acts  which,  though  binding  on  him,  are 


(u)  Ee  Bentham  Mills  Spinning  Co.,  11  Ch.  D.  900,  where  the 
bankrupt  was  indebted  to  the  company. 

(x)  Ex  parte  Harrison,  28  Ch.  D.  363. 

(y)  46  &  47  Vict,  c.  52.  \  44,  cl.  1.  Joy  v.  Campbell.  1  Soli.  & 
Let:  328;  Pinkett  v.  Wright,  2  Ha.  120.  'See,  as  to  reputed  own- 
ership, infra,  and  as  to  the  effect  of  an  equitable  assignment, 
Burn  v.  Carvalho,  4  M.  &  Cr.  690. 

(z)  Winch  v.  Keeley,  1  T.  R.  019;  Boddington  v.  Castelli,  1  E. 
&  B.  B.  879,  affirming  Castelli  v.  Boddington,  ib.  66.  Whether 
the  assignee  of  the  debt  can  sue  depends  on  the  application  of 
the  Jud.  Act,  1873,  I  25,  cl.  6. 

(a)  Carpenter  v.  Marnell,  3  Bos.  &  P.  40. 

\b)  Ante,  p.  630. 

(c)  See  the  authorities  referred  to  infra  ?  4  in  connection  with 
the  subject  of  secured  bills,  and  Ex  parte  Waring.  See  also  Ex 
parte  Carrick,  2  De  G.  &  J.  208;  Ex  parte  Gledstanes,  3  M.  D.  & 
I).  109;  Ex  parte  Mackey,  2  ib.  136;  Ex  parte  Glyn.  1  ib.  25;  Ex 
parte  Brown,  '.,  M.  &  A.  471.  And  see,  as  to  a  creditor's  right  oi 
appropriating  securities  to  one  debt  rather  than  to  another,  Ex 
parte  Johnson,  3  De  G.  M.  &  G.  218.  and  the  cases  above  cited. 

(*)  Edwards  v.  Glyn,  2  E.  &  E.  29;  Toove.y  v.  Milne,  2  B.  & 
A.  683;  Moore  v.  Barthrop,  1  B.  &  C.  5.     See  ante,  p.  630. 


SET-OFF  AND  MUTUAL  CREDIT.  725 

fraudulent  or  void  as  against,  his  creditors  (e).     Except,  Bk.  IV. 

however,  as  regards  such  matters,  the  rule  holds  good;  Chap.  4. 

.               Sect   2 
and  its  consequences  are  important,  especially  with  re- ' 

spect  to  bankrupt  trustees  and  bankrupt  partners. 

The  Bankruptcy    act,    1883,  avoids    as    against  the  Transactions 
trustee: —  void  as 

1.  All  fraudulent  preferences  (/);  but  there   is   an  a"aiI1-st 
exception   in  favour  of  purchasers   for  value  without 
notice  (g). 

*  2.  All  voluntary  settlements  or  dispositions  of  prop-  [  *  (554] 
erty  made  within  two  years  before  the  bankruptcy;  or 
even  if  made  within  ten  years  before,  unless  the  parties 
claiming  the  property  can  prove  that  the  settlor,  &c, 
had  other  assets  sufficient  to  enable  him  to  pay  his 
debts  (/t),and  that  his  interest  in  the  property  in  ques- 
tion passed  to  the  trustee  or  grantee  thereof  (i). 

3.  Covenants  to  settle  after- required  property  in 
which  the  debtor  h°.d  no  vested  or  contingent  interest 
and  which  does  not  come  to  him  through  his  wife  (k). 

The   statute  further   enables   the   trustee   in   certain  Executions, 
cases  to  obtain  the  benefit  of  executions  against  debtors 
who  are  adjudicated  bankrupt  (I). 

On  the  other  hand  the  statute  contains  an  important  Protected 
provision  (m)  for  the  protection  of  persons   bond  fide  transactions, 
dealing  with  a  person  liable  to  be  adjudicated  bankrupt, 
and  having  no   notice  of  any  act  of  bankruptcy  com- 
mitted by  him.      This  provision,  however,  does  not  pro- 
tect any  transaction  avoided  by  §§  45,  47  or  48. 

3.   Of  set-off  and  mutual  credit. 

"With  respect  to  debts  owing  to  a  bankrupt  by  per-  Mutual 
sons  to  whom   he  is  indebted,  the  balance  only  is   re-  credits. 
garded  as  payable  to  or  by  his  estate.     This  equitable 
doctrine  rests  upon  a  statutory  enactment  (n),  which 

(<?)  See,  as  to  this.  Anderson  v.  Maltby.  2  Ves.  J.  255;  Billiteru 
Young,  6  E.  &  B.  40.  See,  also,  Ex  parte  Barter,  26  Ch.  D.  510, 
as  to  the  trustee  not  being  bound  by  a  contract  enabling  a  third 
person  to  use  the  bankrupt's  goods  to  complete  a  contract  en- 
tered into  by  hi  in. 

(/)  I  48,  ante,  p.  628.  (g)  Ibid. 

(h)  See  Ex  parte  Mercer,  17  Q.  B.  D.  290;  Ex  pari c  Russell,  19 
Ch.  D.  588;  Re  Ridler,  22  ib.  74. 

(i)  \  47  (1)  and  (3),  much  abridged,  Ex  parte  Todd,  19  Q.  B.  D. 
186;  and  see  \  29.     See  note  (?)  p.  628. 

(k)  \  47  (2),  and  see  \  29.     See  note  (7)  p.  628. 

(I)  \  46.  set  out  infra,  p.  675. 

(m)  \  49,  set  out  infra,  p.  664. 

(n)  It  was,  however,  recognised  before  the  mutual  credit  clause 
found  its  way  into  the  Bankruptcy  acts.  See  Anon.,  1  Mod.  215; 
Chapman  v.  Derby,  2  Vera.  117. 


726  BANKRUPTCY. 

Bk.  IV.  allows  debts  to  be  set  off  against  each  other  in  many 

Chap.  4.  cases  in  which  they  could  not  be  set  off  had  no  bank- 

Sect  2" ruptcy    intervened    (o).     The    enactment    which    now 

regulates  this  subject  is  as  follows  (p): — 

r  *  6551  *#  3S-  Where  there  have  been  mutual  credits,  mutual  debts,  or 

Mutual  other  mutual  dealings  between  a  debtor  against  whom  a  receiv- 

credit  and  jUg  order  shall  be  made  under  this  Act,  and  any  other  person 
set-off.  proving  or  claiming  to  prove  a  debt  under  such  receiving  order, 

an  account  shall  be  taken  of  what  is  due  from  the  one  party  to 
the  other  in  respect  ot  such  mutual  dealings,  and  the  sum  due 
from  the  one  party  shall  be  set  off  against  any  sum  due  from  the 
other  party,  and  the  balance  of  the  account,  and  no  more,  shall 
be  claimed  or  paid  on  either  side  respectively  ;  but  a  person  shall 
not  be  entitled  under  this  section  to  claim  the  benefit  of  any  set- 
off against  the  property  of  a  debtor  in  any  case  where  he  had  at 
the  time  of  giving  credit  to  the  debtor,  notice  of  an  act  of  bank- 
ruptcy committed  by  the  debtor,  and  available  against  him. 

Tendency  to  The  above  clause  is  evidently  framed  with  a  view  to 
allow  rather  prevent  the  great  injustice  which  would  arise  if  a  per- 
thaii  disallow  gon  wj10  wa8  the  creditor  of  a  bankrupt  on  one  account 
set-off.  an(^  ^  debtor  on  the  other,  were  compelled  to  pay 

twenty  shillings  in  the  pound  on  what  he  owed  to  the 
bankrupt,  and  to  receive  less  than  twenty  shillings  in 
the  pound  on  what  the  bankrupt  owed  him.  There  is, 
therefore,  a  strong  tendency  to  construe  the  clause  in 
question  extensively  rather  than  restrictively,  or,  in  other 
words,  to  favour  the  setting  off  of  cross  demands  by  and 
against  bankrupts  (q)  ;  at  the  same  time  the  courts  can- 
not carry  the  doctrines  of  set-off  further  than  the  lan- 
guage and  spirit  of  the  enactment  warrant,  and  some 
of  the  earlier  cases  on  the  subject  have  been  considered 
as  having  gone  too  far  (r). 
French  v.  The  general  doctrine  is  well  illustrated  by  French  v. 

Fenn.  Fenn,  and  Easum  v.  Cato.     In  French  v.  Fenn  (s),  the 

defendant  purchased  a  row  of  pearls,  and  agreed  with 
one  Cox  to  give  him  one-third  of  the  profits  to  arise 
from  a  sale  of  them.  Cox  became  bankrupt,  and  after- 
wards the  defendant  sold  the  pearls,  and  Cox's  assignees 

(o)  See  Ex  parte  Stephens,  11  Ves. 

lp)  46  &  47  Vict.  c.  52,  ?  38.  The  section  does  not  apply  to 
debts  due  to  or  from  a  firm  if  one  member  only  is  bankrupt,  Lon., 
Bombay,  and  Med.  Bank  v.  Narraway,  15  Eq.  93,  nor  to  actions 
brought  by  bankrupts  as  trustees  for  other  persons.  De  Mattos 
V.  Saunders.  L.  1\.  7  C.  P.  570. 

(q)  See  Ryall  v.  Rowles,  1  Ves.  S.  375. 

(r)  This  is  particularly  the  case  with  Ex  parte  Deeze,  1  Atk. 
228,  and  Ex  parte  Quintin,  3  Ves.  248. 

(s)  3  Doug.  257.  and  Cooke's  Bank.  Law,  565  (ed.  8). 


SET-OFF  AND  MUTUAL  CREDIT.  727 

demanded  one-third  of  the  profits  of  the  sale,  declining  Bk.  IV. 
to  allow  the  defendant  to  set  off  a  debt  due  from  Cox  oh^'94, 

to  him  at  the  time  of  the  bankruptcy  ;  but  it  was  de- ' 

cided  that  such  set-off  ought  to  be  allowed.  The  Court 
held  that  there  was  a  great  distinction  between  mutual 
debts  and  mutual  credits,  and  that,  although  the  defend- 
ant was  not  indebted  to  Cox  at  the  time  of  his  bank- 
ruptcy, inasmuch  as  the  pearls  had  *  not  then  been  [  656] 
sold,  there  was  a  clear  case  of  mutual  credit  justifying 
the  set-off. 

Easum  v.  Cato  (t)  goes  even  further  than  the  last  Easum  v. 
case.  There  tbe  bankrupts  shipped  goods  for  sale  in  a  °* 
the  name  of  Cato,  to  whom  they  were  indebted  ;  Cato 
assented  to  the  use  of  his  name,  and  he  received  the 
proceeds  of  the  sale  ;  he  was  sued  for  these  proceeds 
by  the  assignees,  and  was  held  entitled  to  set  off  against 
them  what  was  owing  to  him  by  the  bankrupts,  although 
the  goods  were  in  no  sense  his. 

The  authority  of  these  cases  has  been  sometimes  Young  v. 
thought  to  be  shaken  by  Young  v.  The  Bank  of  Ben-  Bank  of 
gal  (u).  There  the  Privy  Council  held  that  bankers  BenSal- 
with  whom  notes  of  the  East  India  Company  had  been 
deposited  as  a  security  for  a  loan,  and  who  were  em- 
powered to  sell  the  notes  if  the  loan  was  not  paid,  were 
not  entitled,  after  their  debtor  had  become  bankrupt,  to 
set  off  the  proceeds  of  the  sale  of  the  notes  against  a 
debt  owing  by  the  bankrupt  to  them  unconnected  with 
the  loan  in  question,  and  arising  from  the  discount  by 
the  bankers  of  the  bankrupt's  paper  before  such  loan 
was  made.  In  this  case,  however,  not  only  had  the 
notes  deposited  with  the  bankers  not  been  sold  by  them 
before  the  bankruptcy,  but  the  bankers  were,  in  truth, 
precluded  by  their  own  agreement  from  holding  the  de- 
posited paper  for  any  other  purpose  than  as  a  security 
for  the  loan  to  which  it  was  specially  appropriated. 
Young  v.  The  Bank  of  Bengal,  therefore,  merely  shows 
that  even  if  the  deposited  notes  could  be  treated  as  cash, 
yet  the  right  to  set  off  cross  money  demands  under  the 
mutual  credit  clause  only  exists  where  there  is  no  agree- 
ment inconsistent  with  the  exercise  of  such  right  (x). 

(0  5  B.  &  A.  mi. 

(u)  1  Deac.  622.  See,  on  this  case,  Alsager  v.  Currie,  12  M.  & 
W.  751 . 

(x)  Ex  parte  Flint,  1  Swanst.  30;  Key  v.  Flint,  8  Taunt.  21  ; 
Thomas  v.  Da  Costa,  8  Taunt.  345,  and  Buchanan  v.  Findlay,  9 
B.  &  C.  738,  also  illustrate  this  doctrine.  See.  too,  Hill  v.  Smith, 
12  M.  &  W.  618.  Sec,  further,  as  to  general  liens  and  to  their 
not  attaching  to  particular  securities,  B<  Bowes,  33  Ch.  I).  586  ; 
Brandaou  Barnett,!  Man.  &Gr.  908;  0  ib.630;and  12Cl.&Fin.  787; 


728 


BANKRUPTCY. 


[  *  657] 

Bk.  IV. 

Chap.  4. 
Sect,  2. 


Set-off 
allowed  in- 
dependently 
of  intention. 


Cases  of 
hills  re- 
turned dis- 
honoured. 


Bolland  v. 
Nash. 


Debts  not 
yet  due. 


[  *  658] 


*  It  has,  however,  long  been  established  (hat  mutual 
credit  within  the  meaning  of  the  Bankruptcy  acts  may 
exist  independently  of  any  intention  to  create  a  right 
of  set-off.  For  example,  if  A.  sells  goods  to  B.,  and 
B.  obtains  from  third  parties  an  acceptance  cf  A.'s 
without  his  knowledge,  A.'s  claim  against  B.  for  the 
goods  sold,  and  B.'s  claim  against  A.  on  the  bill,  may 
be  set  off  on  A.'s  bankruptcy,  although  the  acceptance 
has  not  fallen  due  (y). 

Moreover,  the  mutual  credit  clause  applies,  although 
the  demand  of  the  bankrupt  may  not  have  been  con- 
tinuous from  the  time  when  it  accrued  to  the  time  of 
the  bankruptcy.  This  is  often  the  case  when  the  bank- 
rupt's claim  rests  on  a  bill  of  exchange  which  he  has 
indorsed  away,  but  which  after  his  bankruptcy  is  re- 
turned dishonoured.  Thus  in  Bolland  v.  Nash  (z),  A. 
accepted  a  bill  for  advances  made  to  him  by  his  bank- 
ers, and  they  indorsed  the  bill  to  a  third  person  for 
value  and  became  bankrupts.  The  indorsee  was  him- 
self indebted  to  the  bankers  ;  and  he  having  required 
A.  to  pay  the  bill,  which  A.  refused  to  do,  and  having 
then  set  the  debts  due  to  himself  from  the  bankers  and 
to  them  from  himself  against  each  other,  returned  the 
bill  to  the  assignees.  They  then  sued  A  upon  it,  but 
it  was  held  that  he  was  entitled  to  set  off  the  balance 
due  from  the  bankers  to  him  on  his  account  with  them 
at  the  time  of  their  bankruptcy,  although  at  that  time 
they  did  not  hold  his  bill. 

It  is  also  established  that  demands  by  and  against  a 
bankrupt  may  be  set  off,  although  they  may  not  have 
become  enforceable  previously  to  his  bankruptcy  ;  e.  g., 
where  bills  have  been  accepted  but  have  not  become 
due  (a);  where  calls  have  become  due  since  the  bank- 
ruptcy (b). 

It  may  also  be  observed  that  simple  contract  debts 
may    be    *  set    off   against    specialty    debts,    and   vice 

Bock  v.  Gorrissen,  2  De  G.  F.  &  J.  434  ;  Joues  v.  Peppercorne, 
Johns.  430  ;  Olive  v.  Smith,  5  Taunt,  56  ;  and  as  to  liens  on  funds 
appropriated  to  the  payment  of  particular  bills,  see  Inman  v. 
Clare,  Johns.  769  ;  Jeffryes  v.  Agra  and  Masterman's  Bank,  2Eq. 
674. 

(y)  Hankey  v.  Smith,  3  T.  R.  507.  See,  also,  Bailey  v.  John- 
son, L.  R.  6  Ex.  279,  and  7  Ex.  263,  for  another  but  different 
example  turning  on  \\  39  and  81  of  the  Bank,  act,  1869. 

(z)  8  B.  &  C.  105.  See,  too.  Ex  parte  Staddon,  3  M.  D.  &  D. 
256,  noticed  infra,  p.  662:  and  Ex  parte  Huckey,  1  Madd.  577. 

(a)  Ex  parte  Wagstaff,  13  Ves.  65  ;  Ex  parte  Boyle,  Cooke's 
Bank.  L.  571  (ed.  8);  Sheldon  r.  Rothschild.  8  Taunt,  156. 

(b)  Carralli  and  Haggard's  claim.  4  Ch,  174  ;  Re  Duckworth,  2 
Ch.  578  ;    Ex  parte  Strang.  5  Ch.  492. 


SET-OFF  AXD  MUTUAL  CREDIT.  729 

versa  (c);  that  where  damages  are  proveable  they  may  Bk.  IV. 
be  set  off  against  debts  (d);  and  that  a  secured  creditor  (  lial1-1- 
who  owes  money  to  the  bankrupt  has  a  right  to  set  off  *" 
what  he  owes  from  the  amount  due  to  him  on  his  security 
and  to  treat  the  security  as  a  security  for  the  balance  (e). 

In  order,  however,  that  cross  demands  may  be  set  off  Rules  as  to 
against  each  other  under  the  mutual  credit  clause,  it  is  set  off  in 
necessary—  cases  of  bank- 

1.  That  both  demands  shall  be  money  demands,  and  1U*J  cy" 
that  the  sum  sought  to  be  set  off  against  the  trustees 
shall  be  proveable  against  the  bankrupt's  estate  ; 

2.  That  the  demands  shall  be  mutual  ; 

3.  That  the  demands  against  the  bankrupt  shall  have 
arisen  before  the  demandant  had  notice  of  the  com 
mission  of  an  act  of  bankruptcy. 

First,  as  to  the  nature  of  the  demands. — It  was  held  l.  The  cross- 
in   the  well-known  case   of  Rose  v.    Hart    (/)   that   a  demands 
fuller,  who  was  sued  by  the  assignees  of  a  bankrupt  for  must  ,)e 
the  recovery  of  cloths   sent  to  be  dressed,  could  not  ™  me?.  f  e" 
retain  the  goods  until  he  was  paid  all  moneys  owing  by  p  jt   .+ 

the  bankrupt  for  services  previously  rendered  him.  The 
assignees'  demand  was  not  in  substance  a  money  de- 
mand at  all  ;  they  claimed  the  goods  ;  and  against  such 
a  claim  it  was  decided  that  the  fuller  could  only  oppose 
his  lien  for  what  was  due  in  respect  of  his  work  on 
those  goods  (g). 

The  doctrine  thus  established  in  Rose  v.  Hart,  viz., 
that  by  mutual  credits  are  meant  credits  which  from 
their  nature  must,  or  at  all  events  probably  will,  termi- 
nate in  debts  (i.  e.,  money  demands),  has  ever  since 
been  recognized  as  correct  ;  and  applies  to  the  expres- 
sion mutual  dealings  (h)  in  the  Bankruptcy  act,  1883. 

*  Secondly,  as  to  the   mutuality  of  the  demands. —  [*659] 
Cross  demands  cannot  be   set  off  against  each   other.  %  The  cr0ss- 
unless  they  exist  in  favour  of  and  against  the  same  per-  demands 

(c)  Lanesborough  v.  Jones,  1  P.  W.  325. 

((/)  Mercey  Steel  and  Iron  Co.  v.  Naylor  &  Co.,  9  App.  Ca.  438, 
and  9  Q.  B.  D.  648  ;  Peat  v.  Jones,  8  Q.  B.  I).  147.  See  as  to 
value  of  tillages  and  rent.  Alloway  v.  Steere,  10  Q.  B.  D.  22. 

(e)  Ex  parte  Barnett,  9  Ch.  293. 

(/)  8  Taunt.  499,  and  2  Sm.  L.  C,  following  Ex  parte  Ocken- 
den,  1  Atk.  235,  and  correcting  Ex  parte  Deeze,  1  Atk.  228,  and 
Ex  parte  Present,  ib.  230. 

{(/)  If  the  defendant  had  sold  the  goods,  and  the  assignees  had 
sued  for  the  money  produced  by  their  sale,  the  result  would,  it 
is  conceived,  have  been  the  same.     See  Ex  parte  Boas,  Buck.  125. 

(h)  See  Eberle's  Hotels  Co.  v.  Jonas,  18  Q.  B.  I).  459  ;  Ex  parte 
Bolland,  8  Ch.  D.  225  ;  Ex  parte  Price,  10  Ch.  648,  where  a  liqui- 
dator ofa  company  proved  for  a  debt  due  to  it,  and  the  trustee 
was  held  not  entitled  to  deduct  the  estimated  value  of  a  current 
policy  issued  by  the  company,        , 


730 


BANKRUPTCY. 


Bk.  IV. 

Chap.  4. 
Sect.  2. 


must  be 
mutual. 
Forster  v. 
Smith. 


Case  where 
one  partner 

only  is 
bankrupt. 


[  *  660] 

Joint  debts 
cannot  be  set 
off  against 

separate 

debts. 


sons  in  the  same  rights.  In  Forster  v.  Smith  (i),  Wil- 
son &  Co.  were  on  the  one  hand  indebted  to  their  bank- 
ers, and  were  on  the  other  hand  their  creditors  in  re- 
spect of  three  parcels  of  bank  notes.  One  of  these  par- 
cels belonged  to  Wilson  &  Co. ;  another  parcel  also  be- 
longed to  them,  but  only  as  a  security  for  debts  owing 
to  them  by  third  persons;  the  third  parcel  was  held  by 
Wilson  &  Co.  merely  as  trustees.  On  the  bankruptcy 
of  the  bankers  it  was  held  that  "Wilson  &  Co.  were  en- 
titled to  set  off  against  their  debt  to  the  bankers  the 
amount  of  the  two  first  parcels  of  notes,  but  not  the 
amount  of  the  third. 

Other  cases  may  be  referred  to  as  authorities  for  the 
proposition  that  a  debt  owing  by  a  person  in  his  indi- 
vidual capacity  cannot,  in  bankruptcy,  be  set  off  against 
a  debt  owing  to  him  as  trustee  (k). 

It  was  at  one  time  thought  that  in  an  action  by  the 
assignees  of  a  bankrupt  the  defendant  could  not  set  off 
a  debt  due  to  him  from  the  bankrupt;  as  although  the 
assignees  might  sue  him  he  could  not  sue  them  (I). 
But  this  notion  has  long  been  deservedly  exploded  (ra). 
But  before  the  Judicature  acts  if  some  only  of  the 
members  of  a  firm  were  bankrupt,  and  the  trustees  of 
the  bankrupt  partners,  together  with  the  solvent  part- 
ners, joined  in  an  action  for  the  recovery  of  a  debt  due 
to  the  firm,  the  defendant  could  not  set  off  a  debt  due 
from  the  firm  to  him  (n).  But  now  it  is  apprehended 
this  could  be  done  (o). 

*The  doctrine  of  mutuality  is  of  especial  import- 
ance to  partners,  for  from  it,  it  follows  that  a  demand 
against  a  firm  cannot  be  set  off  against  a  cross  demand 
of  some  or  one  only  of  its  members,  and  that  a  demand 
by  one  or  more  partners  cannot  be  met  by  setting  off  a 
cross  demand  against  a  firm  consisting  of  him  or  them 
and  others.  This  rule  is  as  clearly  established  in  bank- 
ruptcy as  it  was  at  law  and  in  equity,  when  the  rights 
of  solvent  persons  only  were  under  consideration  (p). 

(i)  12  M.  &W.  191. 

(k)  See  Ex  parte  Morier,  12  Ch.  D.  491;  Ex  parte  Kingston,  6 
Ch.  632;  Bailey  v.  Finch.  L.  K.  7  Q.  1'..  34,  where  the  executor 
was  himself  residuarv  legatee,  and  a  set-off  was  allowed;  Fair  v. 
Melver,  16  East,  130;  Boyd  v.  .Mangles,  16  M.  &  W.  337;  Watts 
r.  Christie.  11  Bear.  546. 

(/)  Ryall  v.  Larkin,  1  Wils.  155,  and  Bull,  N.  P.  181. 

(m)  See  Rid  out  v.  Brough,  Cowp,  133. 

(n)  Stanifortb  v.  Fellowes,  1  Marsh.  184;  Thomason  v.  Frere, 
10  East,  418.  (o)  See  ante,  book  ii.  ch.  3,  \  2. 

{jj)  Ex  part,  Morier,  12  Ch.  D.  491;  Ex  parte  Soames,  3  D.  & 
C.  320;  Ex  parte  Twogood.  11  Yes.  517;  Lanesborough  v.  Jones, 
1  P.  W.  325. 


SET-OFF  AND  MUTUAL  CREDIT.  731 

In  Watts  v.  Christie  (q),  bankers  were  indebted  to  Bk.  IV. 
A.  on  his  separate  account,  but  were  creditors  of  A.  &  ~ 'hap.  4. 
Co.  on  their  joint  account.     Whilst  the  bankers   were 


in  difficulties,  but  before  they  committed  any  act  of  Watts y. 
bankruptcy,  A.  assigned  what  was  due  to  him  on  his  ^lllistie- 
separate  account  to  A.  &  Co.,  and  directed  the  bankers 
to  transfer  what  was  standing  to  his  credit,  to  the  credit 
of  A.  &  Co.  This,  however,  was  not  done.  On  the 
bankruptcy  of  the  bankers  it  was  held  that  A.  &  Co. 
could  not  set  off  what  was  due  from  them  to  the  bank- 
ers against  what  was  due  from  the  bankers  to  A. 

Again,  if  A.  and  B.  are  partners,  and  C.   is  indebted  Other  illusta- 
to  them,  and   A.  and   B.  dissolve  partnership,  and  its  tions  of  same 
business  is  continued  by  B.  and  he   becomes  indebted  ^n     * 
to  C.  who  is  afterwards  adjudged  bankrupt;  B.  cannot 
set  off  his  separate  debt  to  C.  against  the  debt  due  from 
C.  to  the  late  firm  of  A.  and  B.  (r). 

These  principles  apply  where  one  partner  only  is 
bankrupt,  and  his  separate  estate  is  more  than  sufficient 
to  pay  his  separate  debts.  Even  in  such  a  case  a  debt 
due  to  him  and  the  solvent  partners  jointly  cannot  be 
set  off  against  a  debt  due  by  him  alone  (s). 

Moreover,  where  A,  B.  and  C.  are  jointly  indebted 
to  D.,  who  is  himself  indebted  to  A.,  B.  and  C.  sepa- 
rately and  on  several  accounts,  D.'s  separate  demands 
against  A,  B.  and  C.  *  respectively  cannot  be  met  by  [  *  661] 
setting  off  their  respective  proportions  of  the  debt  ow- 
ing by  them  jointly  to  D.  (/). 

In  connection  with  this  subject  it  is  necessary  to  ad-  James  ?•. 
vert  to  James  v.  Kynnier  (u).  There  A.  and  B.  were  Kynnier. 
jointly  indebted  to  C,  who  required  payment,  or  to  be 
accommodated  with  a  loan  to  the  amount  due  to  him. 
A.  thereupon  lent  C.  the  amount  due  to  him,  and  re- 
ceived his  promissory  note  for  it.  C.  became  bankrupt, 
and  it  was  held  that  the  debt  due  from  A.  and  B.  had 
in  fact  been  paid  by  A.,  and  that  both  the  promissory 
note  given  by  C.  and  the  security  given  to  C.  by  A. 
and  B.,  ought  to  be  given  up  to  be  cancelled.  The  case 
is  one  rather  of  payment  than  of  set  off,  and  cannot  be 
considered   as  opposed   in  principle  to  the  rule  that  a 

(q)  11  Beav.  54(5. 

(>•)  Ex  parte  Boss,  Buck,  125.  The  marginal  note  in  this  case 
is  apt  to  mislead. 

(s)  Ex  parte  Twogood,  11  Ves.  517.  Ex  parte  Quintin,  3  Ves. 
248,  is  opposed  to  this,  hut  cannot  now  he  considered  law. 
Neither  can  Ex  parte  Edwards,  1  Atk.  100,  be  relied  upon. 

(t)  Ex  part,  Christie,  10  Ves.  105. 

(«)  5  Ves.  108. 


BANKRUPTCY. 


Bk.  IV. 

Chap.  4. 
Sect.  2. 


Agreements 
to  set  off 
joint  against 
separate 
debts. 


Application 
of  doctrines  of 
set  off  to 
sureties. 


Ex  parte 
Stephens. 

[*662] 


Ex  parte 
Staddon. 


joint  debt  cannot  be  set  off  against  a  separate  debt,  and 
vice  versa. 

It  is  hardly  necessary  to  observe  that  an  agreement 
to  the  effect  that  a  joint  shall  be  set  off  against  a  sepa- 
rate debt,  or  vice  versa,  is  perfectly  valid,  and  if  duly 
entered  into  will  be  binding,  notwithstanding  the  sub- 
sequent bankruptcy  of  tbe  parties  (x).  So,  if  parties 
choose  to  agree  that  demands  which  they  would  other- 
wise be  entitled  to  set  off  shall  be  kept  separate  and 
distinct,  and  then  bankruptcy  ensues,  the  agreement 
will  nevertheless  be  binding  upon  them,  as  has  already 
been  seen  (y). 

It  remains  to  notice  the  application  of  the  doctrine 
of  mutuality  of  credit  to  the  case  of  sureties.  Where 
there  are  cross  claims  between  a  creditor  and  his  prin- 
cipal debtor,  capable  of  being  set  off  against  each  other, 
the  surety  of  the  debtor  can  in  bankruptcy  insist  that 
these  claims  shall  be  set  against  each  other,  so  that  he 
may  be  exonerated  if  possible  (z). 

A  very  remarkable  extension  of  this  principle  was 
made  in  Ex  parte  Stephens  (a).  In  that  case  a  lady 
was  a  creditor  of  her  *  bankers,  although  she  did  not 
know  it,  and  she  as  surety  for  her  brother  joined  him 
in  a  joint  and  several  note  to  secure  repayment  of 
1000Z.  lent  him  by  the  bankers.  The  bankers  became 
bankrupt,  and  the  assignees  sued  the  brother  alone 
upon  the  note;  but  Lord  Eldon,  upon  the  petition  of  the 
brother  and  the  sister,  stayed  the  action,  and  ordered 
that  the  money  due  on  the  note  by  the  brother  and  his 
sister  as  his  surety  should  be  set  off  against  the  money 
owing  by  the  bankrupts  to  the  sister  alone  (6). 

Again,  in  Ex  parte  Staddon  (c),  bankers  advanced 
to  a  customer,  A.,  500?.  on   the  security  of  his  promis- 

(x)  In  Kinnerley  v.  Hossack,  2  Taunt.  170,  there  was  such  an 
agreement.  See,  too,  Vulliamy  v.  Noble,  3  Mer.  618,  where  the 
agreement  was  inferred  from  past  dealings. 

{y)  See  ace.  Ex  parte  Flint,  1  Swanst.  30,  and  Young  r.  Bank 
of  Bengal,  1  Deac.  622,  noticed  ante,  p.  656. 

(z)  Ex  parte  Hanson,  12  Yes.  346,  and  18  ib.  232.  The  equit- 
able doctrines  of  marshalling  apply  in  bankruptcy,  see  infra,  \ 
4:  Ex  parte  Salting,  25  Ch.  I).  148;  Ex  parte  Alston,  4  Ch.  168. 

(o)  11  Ves.  24.  The  circumstances  of  this  case  were  peculiar. 
A  gross  fraud  had  been  committed  by  the  bankers  on  the  sister, 
by  inducing  her  to  believe  that  they  had  bought  stock  for  her  as 
requested,  when  in  point  of  fact  they  had  done  no  such  thing, 
but  had  applied  her  money  to  their  own  use. 

(l>)  See,  too,  Vulliamy  v.  Noble,  3  Mer.  621.  See  the  observa- 
tions of  the  M.  R.  on  this  case,  and  on  Ex  parte  Stephens  in  Mid- 
dleton  v.  Pollock,  20  Eq.  515. 

(c)  3  M.  D.  &  D.  256.  Compare  Bolland  v.  Nash,  8  B.  &  C. 
105. 


SET-OFF  AND  MUTUAL  CREDIT.  733 

sory  note,  and  deposited  this  note   and  others  with  B.  Bk.  IV. 
&  Co.,  as  a  security  for  advances  made  by  them.     The  ~    ?'<?' 

bankers  became  bankrupt.     At  the  time  of  their  bank-  kI L_"*J 

ruptcy,  A.  was  the  holder  of  their  notes  to  the  amount 
of  520Z.,  and  B.  &  Co.  had  in  their  hands  securities  of 
the  bankrupts  more  than  sufficient  to  cover  what  was 
due  from  them  for  advances  made  to  them  by  B.  & 
Co.  B.  &  Co.  compelled  A.  to  pay  his  promissory  note, 
he  being  ignorant  of  the  dealings  between  them  and 
the  bankers. 

Subsequently,  B.  &  Co.,  having  been  paid  all  that 
was  due  to  them  from  the  bankrupts,  delivered  up  to 
the  assignees  the  securities  in  their  hands.  It  was  held, 
that  as  between  A.  and  the  bankers,  A.  was  entitled, 
first,  to  be  repaid  what  he  had  paid  to  B.  &  Co.  as  their 
surety,  and  secondly,  to  set  off*  against  what  was  due 
from  him  to  the  assignees  on  his  promissory  note,  the 
amount  due  to  him  from  the  bankrupts  in  respect  of 
their  notes  in  his  hands. 

Thirdly,  as  to  the  notice  of  the  act  of  bankruptcy. —  3.  Demands 
The  language  of  the  mutual  credit  clause  precludes  set-  arising  after 
ting  off  a  demand  accruing  against  a  bankrupt  by  rea-  notice  of  an 
son  of  anything  clone  after  notice  of  an  act  of  bank   '     tcy  ^au." 
ruptcy  committed  by  him  *and  available  against   him  r  *(363] 
for     adjudication     (d).       Therefore,    although     where  not  be  set 
bankers  first  stop  payment  and  then  commit  an  act  of  off. 
bankruptcy,  a  holder  of  their  notes  can  set  off  such  of 
them  as  came  to  his  hands  before  the  act  of  bank- 
ruptcy (e),  he  cannot  set  off  those  which   came  to  his 
hands  after  that  event,  if  he  had  notice  of  it  (/).     So, 
if  a  person  commits   an  act  of  bankruptcy   which  is 
known  to  his  bankers,  and  they  nevertheless  afterwards 
honour  his  drafts,  they  cannot  set  off  the  payments  in 
respect  of  them,  against  the  demand  of  the  trustees 
for  the  balance  standing  to  the  credit  of  the  bankrupt 
at  the  time  the  act  of  bankruptcy  was  committed  (g). 

With  a  view   to  avoid   paying  debts   to  trustees  in  Buying  up 
bankruptcy,  recourse  is  frequently  had  by  the   debtors  bills  of  bank- 
of  a  failing  person  to  the  expedient  of  buying  up  his  ru^i- 

{d)  Ante,  p.  Co."),  Elliott  v.  Turquand,  7  App.  Ca.  79  ;  and  see 
Hawkins  r.  Tenfold.  2  Ves.  S.  550  ;  Vernon  v.  Hankey,  2  T.  R. 
113. 

(e)  Hawkins  v.  Whitten,  10  B.  &  C.  217:  Dickson  v.  Cass,  1  B. 
&  Ad.  343;  Forster  v.  Wilson,  12  M.  &  W.  191. 

if)  Dickson  r.  Cass,  1  B.  &  Ad.  343,  where  some  only  of  the 
firm  had  committed  acts  of  bankruptcy. 

(g)  Vernon  v.  Hankey,  2  T.  R.  113,  and  3  Bro.  C.  C.  313.  See 
too,  Kynaston  v.  Crouch,  14  M.  &  W.  266;  Tamplin  v.  Diggins,  2 
Camp.  312. 


734 


BANKRUPTCY. 


Bk.  IV. 
Chap.  4. 
Sect.  2. 


Eelation 
hack  of 

[  *  664] 

trustee's 
title. 


Relation 
back  of 
trustee's 
title. 


acceptances  in  order  to  set  them  ufl  against  the  sums 
which  the  purchasers  owe  him.  If  a  debtor  obtains  the 
acceptances  of  his  creditors  in  this  way  for  himself, 
and  without  notice  of  any  act  of  bankruptcy,  the 
debtor  will  be  able  to  set  off  the  full  amount  of  the 
acceptances,  however  little  he  may  have  paid  for  their 
purchase  (h);  but  it  will  be  otherwise  if  he  had  notice 
of  the  act  of  bankruptcy  (*);  or  if  he  has  obtained 
the  acceptances  not  bond  fide  to  protect  himself,  but 
as  a  trustee  for  others,  and  in  order  to  enable  them 
to  avail  themselves  of  his  right  of  set-off  (k). 

4.   Of  the  time  from  tcliich  the  title  of  the  trustee  dates. 

Under  the  old  law  the  title  of  the  assignee  of  a  per- 
son adjudicated  bankrupt  on  a  creditor's  petition  dated 
not  from  *  the  time  of  adjudication,  but  from  a  time 
anterior  thereto,  viz.,  from  the  time  of  the  commission 
of  the  earliest  act  of  bankruptcy  subsequent  to  the 
accrual  of  the  petitioning  creditor's  debt  (I).  As  regards 
the  bankrupt's  personal  property,  whatever  he  was  en- 
titled to  at  that  time  or  acquired  subsequently  (and 
before  he  obtained  his  certificate),  became  legally  vested 
in  his  assignees  ;  and  as  regards  his  real  property, 
although  the  legal  estate  in  it  only  vested  in  the. 
assignees  from  the  time  of  their  appointment,  still  they 
could  recover  whatever  might  have  been  conveyed  away 
by  the  bankrupt  after  the  commission  of  any  act  of 
bankruptcy  subsequent  to  the  accrual  of  the  petitioning 
creditor's  debt  (m).  To  this  rule,  however,  certain  im- 
portant exceptions  (known  as  protected  transactions) 
were  introduced  by  statute  in  favour  of  persons  deal- 
ing with  bankrupts  bond  fide,  and  without  notice  of 
any  act  of  bankruptcy.  The  law  upon  this  subject  is 
now  contained  in  the  following  enactments  of  the  Bank- 
ruptcy act,  1883. 

I  43.  The  bankruptcy  of  a  debtor,  whether  the  same  takes 
place  on  the  debtor's  own  petition  or  upon  that  of  a  creditor  or 
creditors,  shall  be  deemed  to  have  relation  back  to,  and  to  com- 
mence at,  the  time  of  the  act  of  bankruptcy  being  committed 
on  which  a  receiving  order  is  made  against  him,  or.  if  the  bank- 
rupt is  proved  to  have  committed  more  acts  of  bankruptcy  than 

(h)  Hawkins  v.  Whitten,  10  B.  &  C.  217  ;  Dickson  v.  Cass,  1 
B.  &  Ad.  343. 

(0  Dickson  v.  Cass,  1  B.  &  Ad.  343. 

(k)  Lackington  v.  Combes,  6  Bing.  N.  C.  71  ;  Fair  r.  Mclver, 
16  East  130. 

(/)  Cooper  v.  Chitty,  1  Burr.  20,  and  note  thereto  in  1  Sm.L.C. 

(m)  See  1  Griffith '&  Holmes'  Bank.  Law,  257,  et  scq. 


PROTECTED  TRANSACTIONS.  735 

one,  to  have  relation  back  to,  and  to  commence  at,  the  time  of  the  Bk.  IV. 
first  ot  the  acts  of  bankruptcy  proved  to  have  been  committed  Chap.  4. 
by  the  bankrupt  within  three  months  next  preceding  the  date  of  >ec  '  ~" 


the  presentation  of  the  bankruptcy  petition  ;  but  no  bankruptcy 
petition,  receiving  order,  or  adjudication  shall  be  rendered  in- 
valid by  reason  of  any  act  of  bankruptcy  anterior  to  the  debt 
of  the  petitioning  creditor  (n). 

\  49  Subject    to  the  foregoing   provisions  of  this  Act  with  Protected 
respect  to  the  effect  of  bankruptcy  on  an  execution  or  attach-  transactions, 
ment  (o),  and  with  respect  to  the   avoidance  of  certain  settle- 
ments (p),  and  preferences  (q),  nothing  in  this  Act  shall   invali- 
date, in  the  case  of  a  bankruptcy — 

(a)  Any  payment  by  the  bankrupt  to  any  of  his  creditors, 

(b)  Any  payment  or  delivery  to  the  bankrupt, 

*(c)  Any  conveyance  or  assignment  by  the  bankrupt  for  valu-  ["  *  665] 
able  consideration, 

(d.)  Any  contract,  dealing,  or  transaction  by  or  with  the  bank- 
rupt for  valuable  consideration, 

Provided  that  both  the  following  conditions  are  complied  with, 
namely — 

(1.)  The  payment,  delivery,  conveyance,  assignment,  contract, 
dealing,  or  transaction,  as  the  case  may  be,  takes  place 
before  the  date  of  the  receiving  order  ;  and 

(2. )  The  person  (other  than  the  debtor)  to,  by,  or  with  whom 
the  payment,  delivery,  conveyance,  assignment,  con- 
tract, dealing,  or  transaction  was  made,  executed,  or 
entered  into,  has  not  at  the  time  of  the  payment,  de- 
livery, conveyance,  assignment,  contract,  dealing  or 
transaction,  notice  of  any  available  act  of  bankruptcy 
committed  by  the  bankrupt  before  that  time  (r). 

These  provisions  are  practically  sufficient  to  protect 
all  honest  dealings  and  transactions  with  bankrupts 
without  notice  of  any  act  of  bankruptcy. 

Notice  of  an  act  of  bankruptcy  within  the  meaning  Notice. 
of  these  clauses  is  not  confined  to  formal  or  even  di- 
rect notice  ;  a  knowledge  of  facts  from  which  an  act  of 
bankruptcy  ought  to  be  inferred  is  sufficient  (s). 

(n)  See  Allen  v.  Bonnett,  L.  R.  5  Ch.  577.  The  title  of  the 
trustee  may  relate  back  to  an  act  of  bankruptcy  committed  be- 
fore the  passing  of  the  Bankruptcy  act,  Ex  parte  Snowball,  7 
Ch.  534. 

(o)  \  45,  infra,  p.  674. 

(p)  \  47,  ante,  p.  654. 

(q)  \  48,  ante,  p.  628. 

(r)  A  bond  fide  payment  by  an  agent  to  his  principal  is  not  pro- 
tected if  the  principal  has  committed  an  act  of  bankruptcy,  and 
the  acent  knows  it  when  he  pays  the  money.  Ex  parte  Edwards, 
13  Q.  B.  D.  747.     Compare  Be  Sinclair,  15  ib.  616. 

(s)  See  Ex  parte  Snowball,  7  Ch.  534. 


736 


BANKRUPTCY. 


Bk.  IV. 
Chap.  4. 
Sect.  2. 


General  rule 
applies,  save 
in  the  above 
excepted 
cases. 

^cts  of  bank- 
ruptcy not 
excepted. 


[*666] 

Consequences 
to  partners 
of  doctrine  of 
relation 
back. 


Bankruptcy 
of  partners 
determines 
their  power 
to  deal  with 
the  property 
of  the  hrm. 


Notwithstanding  the  protection  afforded  by  the  above 
enactments  to  persons  dealing  with  or  suing  out  execu- 
tion against  debtors,  bond  fide,  and  without  notice  of! 
acts  of  bankruptcy  committed  by  them,  the  old  doctrine 
of  relation  applies  as  rigorously  as  ever,  save  in  the  ex- 
cepted cases  (t). 

As  a  rule  that  which  is  in  itself  an  act  of  bankrupfcy 
cannot  be  upheld  as  a  bond  fide  payment,  dealing,  or 
transaction,  within  the  meaning  of  the  enactment  above 
referred  to  (u).  But  an  execution  levied  by  seizure 
and  sale  is  not  invalid  by  reason  only  of  its  being  an 
act  of  bankruptcy  (x). 

*  What  is  notice  to  a  firm  has  been  already  alluded 
to  (y). 

The  doctrine  of  relation  back,  with  its  exceptions, 
having  been  noticed  in  a  general  manner,  it  is  proposed 
to  examine  its  consequences  as  regards,  first ,  bankrupt 
partners  and  persons  dealing  with  them  ;  secondly,  sol- 
vent partners  and  persons  dealing  with  them  ;  and 
thirdly,  creditors  who  have  issued  execution  against 
the  partnership  assets. 

(a)   Transactions  with  bankrupt  partners. 

When  a  firm  is  adjudged  bankrupt,  it  is  necessarily 
dissolved,  and  the  power  of  its  members  to  carry  on  its 
business  is  thereby  determined.  Moreover,  if  there 
has  been  a  joint  act  of  bankruptcy  committed  by  all  the 
partners  (e.  g.,  by  a  conveyauce  of  all  their  property), 
the  title  of  the  trustee  will  relate  back  as  against  all 
the  partners  to  that  time.  But  if  there  has  been  no 
joint  act  of  bankruptcy,  but  each  of  the  partners  has 
committed  an  act  of  bankruptcy  at  a  different  time  from 
the  others,  then  peculiar  difficulties  arise  ;  for  a  cer- 
tain time  having  elapsed  between  the  first  act  of  bank- 
ruptcy and  the  next,  the  firm  cannot,  during  this  time, 
be  treated  as  if  it  had  been  bankrupt,  but  only  as  if  one 
of  its  members  had  been  so.  The  consequences,  there- 
in See  Turquand  v.  Vanderplank,  10  M.  &  W.  180  ;  Kvnaston 
v.  Crouch,  14  M.  &  W.  266  ;  Cannan  v.  South  Eastern  Rail.  Co., 
7  Ex.  851.  It  applied  under  7  &  8  Vict.  c.  Ill,  on  the  bank- 
ruptcy of  companies,  Aitchison  v.  Lee,  3  Drew.  637  ;  Affd.  3  Jur. 
N.  S.  95. 

(w)  See  Bevan  v.  Nunn.  9  Bing.  107. 

{x)  46  &  47  Vict.  c.  52,  \  46  (3).  \  4  (e)  makes  the  execution 
an  act  of  bankruptcy. 

(y)  Ante,  pp.  141,  etseq.  If  execution  issues  at  the  suit  of  sev- 
eral persons  jointly,  and  one  of  them  has  notice  of  an  act  of  bank- 
ruptcy committed  by  the  execution  debtor,  such  notice  avoids 
the  execution  as  against  the  trustee,  Edwards  v.  Cooper,  11  Q. 
B.  33. 


TRANSACTIONS  WITH  BANKRUPT  PARTNERS.  737 

fore,  of  an  adjudication  against  a  firm,  where  each  mem-  Bk.  IV. 
ber  has  committed  a  separate  act  of  bankruptcy  at  a  a™p"9 

different  time  from  the  others,  are,  so   far   as   regards I 1 

transactions  with  strangers,  the  same  as  if  there  had 
been  a  succession  of  adjudications  against  each  mem- 
ber separately  (z).  What  these  consequences  are,  it  is 
now  proposed  to  examine. 

It  has  been  already  pointed  out  that  the  bankruptcy  Bankruptcy 
of  one  partner  dissolves  the  firm  (a).  Moreover,  where  of  one  part- 
one  partner  commits  an  act  of  bankruptcy,  and   is  ad-  ne.r  clete.r" 

•  *  ...        H11I16S  lllS 

judged  bankrupt,  his  power  of  trading  and  of  acting  in  power  to 
his  own  right  in  the  *  disposition  of  the  property  of  the  r  *  (567] 
partnership,  is  determined  as  from  the  date  of  the  act  deal  with 
of  bankruptcy.     Indeed,  so  far  as  he  is   concerned,  he  assets. 
may  be  regarded  as  a  sole  trader  whose  power  of  deal- 
ing with  property  in  his  own  right  ceases  on  an   act  of 
bankruptcy  (b).     On  this  ground,  amongst  others,  the 
assignees    in    Hague  v.  Rolleston  (c) ,  recovered  from  a  pff16/'- 
creditor  of  a  firm  goods  of  the  firm  transferred   to  him 
by  the  bankrupt  after  he  had  committed  an  act  of  bank- 
ruptcy, for  the  purpose,  apparently,  of  preferring  him 
to  other  creditors.      On  the  same  ground,  it  was  deter- 
mined in  Thomason  v.  Frere  .(d),  that  the  indorsement  Thomason  v. 

Frcrp 
of  a  partnership  bill  by  two  out  of  three  partners,  con- 
ferred no  title  on  the  indorsee,  the  indorsement  having 
been  made  after  the  two  indorsers  had  committed  acts 
of  bankruptcy  (e).  This  case  is  very  important,  and  is 
a  clear  authority  for  the  proposition  that  when  a  part- 
ner becomes  bankrupt,  all  his  authorities  to  bind  the 
firm  by  dealings  in  the  ordinary  course  of  business,  are 
to  be  deemed  as  having  been  determined  by  the  act  of 
bankruptcy  (  f ). 

This  doctrine,  however,  must  not  be  carried  too  far. 

(z)  See,  accordingly,  Fox  v.  Hanbury,  Cowp.  445  ;  Edwards  v. 
Hooper,  11  M.  &  W.  *363. 
(a)  Ante,  p.  (J49. 
(6)  Seeder  Bayley,  J.,  in  Harvey  v.  Crickett,  5  M.  &  S.  341. 

(c)  4  Burr.  2174.  See,  also,  Burt  v.  Moult,  1  Cr.  &  M.  525,  a 
similar  case. 

(d)  10  East,  418. 

(e)  See,  accordingly,  Burt?;.  Moult,  1  Cr.  &  M.  525.  [t  is  said 
that  partnership  bills  ought  in  the  case  of  the  bankruptcy  of  one 
partner,  to  be  endorsed  by  his  trustee  and  the  solvent  partners, 
see  Abel  v.  Sutton,  3  Esp.  108,  and  Kamsbottom  v.  Lewis.  1  Camp. 
279.  But  it  is  clear  that  this  is  not  necessary  to  enable  a  bond 
fide  holder  for  value  without  notice  to  sue  on  the  bill.  See  Lacy 
v.  Woolcott,  2  D.  &  R.  458  :  Ex  parte  Robinson,  3  D.  &  Ch.  370', 
and  C.  P.  CoopAr,  Ca.  in  Ch.  temp.  Brougham,  1(>\>. 

(/)  A  for/ion  is  a  bill  given  by  him  in  the  name  of  the  firm 
for  his  separate  debt  invalid  as  against  the  payee,  Heilbut  v. 
Nevill,  L.  R.  4  C.  P.  354,  and  5  ib.  478. 

*  24   LAW    OF   PARTNERSHIP. 


738 


BANKRUPTCY. 


Bk.  IV. 

Chap.  4. 
Sect.  2. 


Lacy  v. 

Woolcott. 


[  *  668] 


Craven  v. 
Edinondson. 


Payments 
made  to 
bankrupt 
partner. 


It  has  already  been  seen  that  persons  who  hold  them- 
selves out  as  partners,  are  liable  for  the  acts  of  each 
other  done  in  the  ordinary  course  of  business,  although 
they  may  have  been  done  without  authority.  On  this 
principle,  it  was  held  in  Lacy  v.  Woolcott  (g),  that  a 
solvent  partner  was  liable  to  abond  fide  holder  of  a  bill 
fraudulently  accepted  in  the  name  of  the  firm  by  a  co- 
partner who  had  previously  committed  an  act  of  bank- 
ruptcy. The  case  was  distinguished  from  Thomctson  v. 
Frere  *  on  the  ground  that  there  the  question  was 
whether  the  property  in  the  bill  was  in  the  assignees 
and  the  solvent  partners,  or  in  the  person  who  had  re- 
ceived it  from  the  bankrupt,  and  that  nothing  was  there 
decided,  or  meant  to  be  decided,  as  to  the  liability  of 
the  firm  to  an  innocent  indorsee  for  value  (h) 

In  conformity  with  the  principle  acted  upon  in  Hague 
v.  Rolleston  and  Thomason  v.  Frere,  it  was  held  in 
Craven  v.  Edinondson  (i),  that  where  a  partner  after 
he  had  committed  an  act  of  bankruptcy,  paid  to  a  cred- 
itor, who  was  aware  of  that  fact,  a  debt  owing  to  him 
by  the  firm,  and  afterwards  the  other  partners  com- 
mitted acts  of  bankruptcy,  whereupon  the  firm  was 
adjudged  bankrupt,  the  .assignees  were  entitled  to  re- 
cover back  the  money  so  paid.  The  decision  on  this 
case  was  rested  entirely  on  the  ground  that  the  agency 
of  the  partner  who  paid  the  money  was  determined  by 
the  act  of  bankruptcy  committed  by  him  ;  whilst  the 
creditor  having  had  notice  of  that  act,  could  not  avail 
himself  of  the  statutory  enactments  relating  to  bond 
fide  dealings  and  payments,  and  which  have  been  already 
adverted  to. 

Under  the  old  law,  if  a  debtor  to  a  trader  who  had 
committed  an  act  of  bankruptcy  paid  the  debt  to  him, 
his  assignees  could  compel  the  debtor  to  pay  them 
again  (j);  and  this  is  still  the  case  if  the  debtor  makes 
the  payment  after  a  receiving  order  has  been  made,  or 
after  he  has  notice  that  an  available  act  of  bankruptcy 
has  been  committed  (k).  'Nevertheless  a  trader,  who 
has  committed  an  act   of  bankruptcy,  can  compel  his 

((,)  2  D.  &  R.  458. 

(h)  In  Ex  parte  Robinson,  3  D.  &  Ch.  376.  the  firm  was  held 
liable  on  the  indorsement  of  the  solvent  partner  after  an  act  of 
bankruptcy  committed  by  his  co-partner.  See  the  judgment  in 
C.  P.  Coop.  Ca.  in  Ch.  Temp.  Brougham,  162,  and   infra,  p.  673. 

(i)  6  Bing.  734  ;  Dickinson  ?'.  Cass,  1  B.  &  Ad.  3A?>,  was  a  very 
similar  case,  except  that  the  creditor  had  not  notice  of  the  actof 
bankruptcy,  and  he  was  accordingly  protected  by  statute. 

(  j\  See  Vernon  v.  Hankey,  2  T.  R.  113. 

(k)  46  &  47  Vict.  c.  52,  \  49,  and  ante,  pp.  664,  665. 


TRANSACTIONS  WITH  SOLVENT  PARTNERS.  739 

debtors  to  pay  him,  so  long  as  no  receiving  order  has  Bk.  IV. 
been  made  against  him  (I).  This  state  of  the  law  is  Chap.  4. 
most  distressing  :  for  if   a  debtor  knows  that  an  act  of  _JJL! 


bankruptcy  has  been  *  committed  by  his  creditor  within  [  *  669] 
three  months,  and  is  pressed  for  payment,  if  he  pays, 
he  runs  the  risk  of  being  compelled  by  the  trustee  to 
pay  again;  and  if  he  refuses,  he  renders  himself  liable 
to  pay  the  costs  of  an  action  brought  against  him  by 
his  creditor.  A  debtor  to  a  firm,  one  of  the  members 
of  which  is  known  to  have  committed  an  act  of  bank- 
ruptcy, should  therefore  pay  the  solvent  partners  (m). 

(b)  Transactions  with  solvent  partners. 

The  bankruptcy  of  any  one  partner,  his  co- partners  Effect  of 
remaining  solvent,  affects  them   in  no  other  way  than  bankruptcy 
this,  viz.,  that  the  trustee  in  bankruptcy  becomes  tenant  °*"  one  Part_ 
in  common  with  them  of  the  partnership  property,  and  gop/.'j,'* 
is  entitled    to    have  the  accounts  of    the   partnership  partners. 
taken,  and  to  receive  the  bankrupt's  share,   whatever 
that  may  be  (n). 

*     The  trustee,  as  has  been  already  observed,  does  not  Solvent 
become  partner  in  the  firm.     The  solvent  partners  are  partners 
entitled  to  get  in  the  joint  assets  (o)  ;  and  unless  there  entitled  to 
be  some  misconduct  on  the  part  of  the  solvent  partners,  ^'"j   "^   f e 
or  unless  the  solvent  partners  are  dead  or  abroad,  the  the  firm, 
trustee  has  no  right  to  interfere  in  the  winding  up  or 
management  of  the  partnership  business.     If  he  does, 
he  will  be  restrained  by  injunction,  at  the  instance  of 
the  solvent  partners  (  p).     The  trustee,  moreover,  can-  Trustee  has 
not  compel  the  solvent  partner  to  deliver  up  the  books  no  right  to 
of  the  partnership  (q).     However,  in  a  case  where  two  *£e  partner- 
persons  were  in  partnership  as  solicitors,  and  one  of  *L  lp.  )0° 
them  became  bankrupt,  and  his  assignees  excluded  the  x^;^0"  '' 
solvent  partner  from  all  interference  in  the  partnership 
affairs,  and  got  possession  of    the  *  deeds  and   docu-  [  *  670 J 
ments  belonging  to  the  clients  of  the  firm,  a  motion  by 

(7)  Prickett  v.  Down,  3  Camp.  131;  Foster  v.  Allanson,  2  T.  E. 
479. 

(m)  See  below.  Money  ordered  to  be  paid  to  a  firm  by  the 
Court  of  Admiralty,  is  payable  to  the  solvent  partners  after  the 
bankruptcy  of  one  of  the  firm  ;  The  Jefferson,  1  Rob.  325. 

(»)  See  ante,  pp.  340,  649. 

(o)  Ex  parte  Owen,  13  Q.  B.  D.  113. 

(p)  See  Allen  v.  Kilbre,  4  Madd.  464.  The  Court  in  Bank- 
ruptcy can  now  do  this,  and  it  is  not  necessarv  to  proceed  in  the 
Chancery  Division  of  the  High  Court,  46  &  47  Vict.  c.  52,  \\  93- 
102. 

(q)  Ex  parte  Finch,  1  D.  &  Ch.  274.  See,  also,  Ex  parte  Good, 
21  Ch.  D.  868. 


740 


BANKRUPTCY. 


Bk.  IV. 
Chap.  4. 
Sect.  2. 


But  they 
have  a  right 
to  see  tliein  : 


and  to  hring 
actions  to  re- 
cover part- 
nership 

debts. 


Solvent 
partner  •will 
he  appointed 

receiver. 


Right  to 

[*67J] 

wind  up  the 

affairs 

of  the  firm, 

personal  to 

the  solvent 

partners. 


the  solvent  partner  for  delivery  to  him  of  such  deeds 
and  documents  was  refused,  upon  the  ground  that,  with- 
out the  consent  of  the  clients,  the  Court  had  no  right  to 
order  their  papers  to  be  delivered  to  one  partner 
only  (r). 

But  although  the  trustee  of  one  partner  has  no  right 
to  the  custody  of  the  partnership  books,  the  solvent 
partners  can  be  summoned  before  the  Court,  and  be 
compelled  to  produce  them,  and  to  answer  questions 
relative  to  the  dealings  of  the  bankrupt  (s),  although  it 
may  not  even  be  alleged  that  there  is  anything  due  to 
him  from  the  firm  (t). 

The  trustee  has  power,  with  the  leave  of  the  Court,  to 
bring  actions  in  the  names  of  himself  and  of  the  sol- 
vent partners  ;  indemnifying  the  latter,  however,  against 
costs,  if  their  names  are  used  only  for  the  sake  of  form, 
and  they  claim  no  benefit  from  the  action  (u).  So  the 
solvent  partners  may  use  the  name  of  the  trustee,  upon 
indemnifying  him  if  he  declines  to  take  any  active  part 
in  the  proceedings  (v)  ;  but  they  may  sue  on  contracts 
without  joining  the  bankrupt  (w). 

If  disputes  as  to  the  management  of  the  partnership 
affairs  arise  between  the  trustee  and  the  solvent  part- 
ners, and  there  is  no  reason  for  distrusting  the  latter, 
the  Court  will  appoint  one  of  them  receiver  of  the  part- 
nership property,  directing  him  to  give  security,  to  pass 
his  accounts,  and  to  furnish  the  trustee  with  proper  ac- 
counts, and  to  allow  him  at  all  reasonable  times  to  in- 
spect the  partnership  books  (x). 

The  power  of  the  solvent  partners  to  wind  up  the 
affairs  of  *  the  partnership  is,  however,  personal  to 
themselves,  and  arises  from  the  confidence  originally 
placed  in  them  by  the  bankrupt,  and  which  is  con- 
tinued to  be  placed  in  them  by  the  Court  so  long  as 
there  is  no  reason  to  the  contrary.  The  right  cannot 
be  transferred  ;  and  therefore,  where  partnership  goods 
were  seized  by  the  sheriff  under  an  execution  against 

(r)  Davidson  v.  Napier,  1  Sim.  297.  Surely  the  solvent  part- 
ner had  more  right  to  them  than  the  assignees. 

(s)  See  46  &  47  Vict.  c.  52,  g  27  ;  Bank.  Rules,  1886,  rr.  69  and 
70  ;  Ex  parte  Trueman,  1  D.  &  C.  464. 

(*)  Ex  parte  Levett,  1  Gl.  &  J.  185. 

(w)  See  46  &  47  Vict.  c.  52,  \  1 13.  See  Ex  parte  Wilson,  2  Deac. 
387,  and  3  M.  &  A.  219,  as  to  general  orders  authorising  as- 
signees to  sue. 

(v)  Ex  parte  Owen,  13  Q.  B.  D.  113  ;  Whitehead  v.  Hughes,  2 
Cr.  &  M.  318,  and  2  Dowl.  Pr.  Ca.  258,  and  4  Tyr.  9:2. 

O)  46&47  Vict,  c.  52,  §114. 

(&•)  See  Ex  parte  Stoveld,  1  Gl.  &  J.  303;  Freeland  p.  Stansfeld, 
2  Sm.  &  G.  479. 


POWERS  OF  SOLVENT  PARTNERS.  741 

a  solvent  partner,  and  the  execution  creditor  purchased  Bk.  IV. 
from  the  sheriff  all  the  execution  debtor's  share  and  in-  Chap.  4. 
terest  in  the  partnership,  and  then  proceeded  to  sell    ' 


the  partnership  effects,  an  injunction  restraining  such 
sale  was  granted  by  the  Court  of  Chancery,  at  the  suit 
of  the  assignees  of  the  other  partner,  who  was  bank- 
rupt (y). 

If  there  is  only  one  partner  living  in  this  country, 
his  co-partners  being  either  dead  or  abroad,  and  he  be- 
comes bankrupt  the  trustee  in  that  case  winds,  up  the 
affairs  of  the  partnership  as  well  as  the  private  affairs 
of  the  bankrupt  (z). 

Notwithstanding  the   doctrine  that  by  an  adjudica-  Sales.  &c, 
tion    of    bankruptcy   against   one   partner  the   firm   is  bv  solvent 
dissolved,   and    the  trustee   of    the   bankrupt  partner par  ueis' 
becomes  tenant  in   common  of  the  partnership  effects 
with  the  solvent  partners,  they  can  sell  the  partnership 
goods  and  chattels,  and  the  trustee   of  the  bankrupt 
partner  has   no   locus  standi  against  a  bond  fide  pur- 
chaser from  them  (b).    In  Fox  v.  Hanbury(c),  the  lead-  Fox  v. 
ing  case  on  the  subject,  one  of  several  partners  became  Haubury. 
bankrupt  ;    afterwards,   partnership  goods  were  bond 
fide  sold  to  the  defendant  by  the  solvent  partners,  and 
after  the  sale   the  firm   was  adjudged  bankrupt  ;  the 
assignees  of  the  firm  sought  to  recover  the  goods  from 
the  purchaser,  upon  the  ground  that  by  the  bankruptcy 
of  one  of  the  partners  the  firm  was  dissolved,  and  the 
solvent  partners  had  no  power  afterwards  to  dispose  of 
the    partnership   effects.     Lord  Mansfield,  in  a  most 
carefully   considered   judgment,   held  that  the  action 
would  not  lie  ;  and   for  two  reasons,   viz.,  first,  upon 
the  broad  ground  that,  after  a  *  partnership  had  been  [  *G72] 
dissolved  by  the  bankruptcy  of  one  partner,  persons  who 
had  dealt  with  the  other  partners  without  notice  of  the 
dissolution,  acquired  a  right   against  the  solvent  part- 
ners and  the  assignees  of  the  bankrupt  partner  ;  and 
secondly,  upon  the  technical  ground  that  the  assignees 
could  not  claim   to  be  more  than   tenants  in  common 
with  the  purchaser,  and  that  trover  would  not  lie  at  the 
suit  of  one  tenant  in  common  against  his  co-tenant,  un- 
less under  very  special  circumstances. 

(y)  Fraser  v.  Kershaw  2  K.  &  J.  406. 

\z)  See  Hankey  v.  Garratt,  1  Ves.  J.  236  ;  Everett  v.  Back- 
house, 10  Ves.  98;  Barker  v.  Goodair,  11  Ves.  86  ;  Dutton  v. 
Morrison,  17  Ves.  210. 

(b)  Sed  qiapre  if  they  are  oulypartners  in  the  profits,  see  Meyer 
v.  Sharpe,  5  Taunt.  74. 

(<■)  Cowp.  445.  See,  also,  Smith  v.  Stokes,  1  East,  363 ;  Smith 
V.  Oriell,  1  East,  368. 


W2 


BANKRUPTCY. 


Bk.  IV. 
Chap.  4. 
Sect.  2. 

Harvey  v. 

Crickett. 


Morgan  v. 
Marouis. 


Principle 
and  effect  of 
foregoing 
cases. 


[  *  673] 


Ex  parte 
Robinson. 


In  Harvey  v.  Crickett  (d),  which  was  not  an  action  of 
trover,  but  assumpsit  for  money  had  and  received,  the 
plaintiffs,  as  assignees  of  a  bankrupt  partner,  sought 
to  recover  from  the  defendant,  creditors  of  the  firm, 
money  paid  to  them  by  the  solvent  partner  after  the 
act  of  bankruptcy  ;  but  it  was  held  that  the  action 
would  not  lie  ;  not,  however,  because  the  plaintiffs  and 
the  defendant  were  tenants  in  common,  but  because, 
notwithstanding  the  bankruptcy  of  one  of  the  partners, 
the  other  was  entitled  to  apply  the  partnership  assets 
in  payment  of  the  partnership  debts. 

Again,  in  Morgan  v.  Marquis  (e),  the  assignees  of  a 
bankrupt  partner  sought  to  recover  from  the  agent  of 
the  firm  monies  received  by  him  from  the  sale  of  goods 
effected  by  him  after  the  bankruptcy,  by  the  desire  of 
the  solvent  partner  ;  but  it  was  held  that  the  action 
would  not  lie,  because  it  was  competent  for  the  solvent 
partner  to  deal  with  the  property  as  he  had  done. 

These  cases  have  been  referred  to  thus  in  detail,  in 
order  to  show  that  they  rest  on  something  more  satis- 
factory than  the  technical  doctrine  that  trover  will  not 
lie  by  one  tenant  in  common  against  the  other.  Al- 
though this  doctrine  was,  no  doubt,  sufficient  for  the 
decision  of  Fox  v.  Hanbury,  Smith  v.  Stokes,  and  Smith 
v.  Oriell,  and  was  apparently  thought  by  the  Court  of 
Exchequer,  in  Buckley  v.  Barber  (/),  to  afford  the 
*  only  reason  by  which  those  decisions  could  be  justified, 
yet  it  is  submitted  that  those  cases,  together  with  the 
others  just  referred  to,  are,  in  fact,  authorities  for  the 
proposition  that,  notwithstanding  the  bankruptcy  of 
one  partner,  the  solvent  partners  can  deal  with  the 
partnership  property  as  if  no  bankruptcy  had  inter- 
vened, and  can  consequently  confer  a  title,  not  only  to 
an  undivided  share  in,  but  to  the  whole  of,  any  of  the 
property  which  they  assume  to  dispose  of  in  the  ordi- 
nary way  of  business,  and  to  persons  dealing  with  them 
bond  fide  (g). 

The  case  of  Ex  parte  .Robinson  (h)  goes  the  whole 

(<?)5M.  &S.  336\  Woodbridge  u.Swann,  4  B.  &  Ad.  633,  and 
Smith  v.  Groddart,  3  Bos.  &  P.  465,  are  nearly  similar  cases,  and 
in  them  there  was  notice  of  the  bankruptcy. 

(c)  9  Ex.  145.  See,  also,  Lewis  v.  White,  2  N.  R.  81,  Ex., 
where  the  assignees  sued  an  auctioneer  in  trover  for  partnership 
property  sold  bv  the  orders  of  the  solvent  partners. 

(/)  6  Ex.  182. 

(g)  See,  accordingly,  Fraser  v.  Kershaw,  2  K.  &  J.  496.  See, 
also,  Tupper  v.  Haythorne,  before  Sir  Wm.  Grant,  and  reported 
in  a  note  in  Gow,  N.  P.  Rep.  135.  See  further  on  this  subject 
generally,  note  2  M.  at  p.  133  of  the  Appendix  to  1  Mont,  Part. 

(h)  3  D.  &  Ch.  376,  aud  1  Mon.  &  A.  18,   reversing  Ex  parte 


POWERS  OF  SOLVENT  PARTNERS.  7-43 


length  of  the  doctrine  here  contended  for.     There  A.  Bk.  IV. 
and  B.  were  partners.     A.  committed  an  act  of  bank-  CnaP-  4- 
ruptcy,  and  afterwards  B.  accepted  bills  in  the  name  of  __1_L__ 
the  firm,  as  a  security  for  a  previously  contracted  obli- 
gation.     On  the  subsequent  bankruptcy  of  B.  it  was 
held  that  the  holders  of  these  bills  were  entitled  to 
prove  against  the  joint  estate  of  A.  and  B. ;  for,  as  be- 
tween the  firm  and  bond  fide  holders  of  the  bills  for 
value,  B.'s  authority  to  accept  them  for  himself  and 
co-partner,  and  for  a  partnership  debt,  could  not  be  dis- 
puted. 

But  although  a  bill  accepted  by  one  partner  in  the  Bill  accepted 
name  of  the  firm,  and  after  the  bankruptcy  one   of  its  in  name  0f 
members,  is  the  bill  of  the  firm,  it  is  obviously  a   very  nrm  atte'' lts 
different  thing  from  the  bill  of  a  firm  in  which  all  the  not  bills  of 
partners  are  solvent  ;  and  an  agreement  to   exchange  the  firm  for 
bills  of  a  firm  for  something  else,  is  not  performed  by  aU  purposes, 
the  delivery  of  bills  of  the  firm,  after  some  or  one  of 
its  members   are  bankrupt.      This  was  the   ground   of 
decision  in  Ex  parte  McGae  (i).      There  A.,  B.  and  C.  Ex  parte 
were  bankers  ;  D.,  a  customer  of  the  bank,  was  in  the  McGae. 
habit  of  receiving   bills   from   various    people  ;  and   it 
was  agreed  between  *  him  and  the  bank,  that  he  should  [  *  674] 
indorse  and  pay  the  bills  into  the  bank,  and  receive  in 
exchange  its  notes.     This  agreement  was  acted  on.    A. 
and  B.  became  bankrupt  ;  but  D.,  without  knowledge 
of  that  fact,  continued  to  pay  in  bills,  and    to  receive 
the  notes  of  the  bank.   Afterwards  C.  became  bankrupt; 
a  joint  adjudication  was  made  against  A.,  B.  and  C.  It 
was  held  that  their  assignees  were  bound  to  return  to 
D.  the  bills  paid  by  him  since  the  bankruptcy  of  A.  and 
B. ;  for  although  he  had  received  notes  for  such  bills, 
those  notes  were  not  such  notes  as  he   had   stipulated 
for,  and  was  entitled  to:  they  were  notes,  not  of  A.,  B. 
and  C,  but,  in  substance,  of  C.   and  the  assignees  of 
A.  and  B. 

It  will  have  been  observed,  that  the  validity   of  bond  Validity  of 
fide  dealings  of  solvent  partners  after   the   bankruptcy  acts  ot 
of  their  co-partners,  does  not  depend  on  the  clause  in  the  solvent  part- 
Bankruptcy  act  relating  to  bond  fide  dealings  and  trans-  liers  "°* 
actions   with  bankrupts,  without   notice  of  any   act  of  absence  of 
bankruptcy  committed  by  them.     That  clause  increases  notice  of 
. bankruptcy. 

Ellis,  Mon.  &  Bl.  249.  Ramsbottom  v.  Duck,  1  Mont.  Part. 
App.  note  2  M. ;  Ramsbotham  v.  Cator,  1  Stark.  228;  Rainsbot- 
tom  v.  Lewis,  1  Camp.  279  ;  and  Abel  is.  Sutton,  3  Esp.  108,  must. 
be  considered  as  overruled  so  far  as  they  are  inconsistent  with 
the  case  in  the  text. 

(;')  19  Ves.  606.     See,  too,  Jornbartf.  Woollett,  2  M.  &  Cr.  389. 


744 


BANKRUPTCY. 


Bk.  IV. 
Chap.  4. 
Sect.  2. 


but  is  not  essential  to  the  safety  of  persor."  bond  fide 
dealing  with  partners  who  have  committed  no  act  of 
bankruptcy.  Harvey  v.  Crickett  (k)  and  Woodbridge  v. 
Swann  (I)  are  conclusive  on  this  head. 


Conflicting 
right  of 
trustee  and 
execution 
creditors. 


(c)  Execution  creditors. 

Subject  to  the  qualifications  introduced  by  statute, 
the  title  of  an  execution  creditor  was  always  liable  to 
be  overridden  by  the  commission  of  an  act  of  bank- 
ruptcy on  the  part  of  the  debtor,  before  the  goods  taken 
in  execution  were  actually  sold  (m). 

The  Statutory  enactment  now  in  force  is  46  &  47 
Vict.  c.  52,  §§  45  and  46,  which  are  as  follows.  It  will 
be  observed  that  there  is  no  distinction  between  traders 
and  non- traders. 


Restriction 
of  rights  of 
creditor 
under  execu- 
tion or 
attachment. 

[*675] 


Duties  of 
sheriff  as  to 
goods  taken 
in  execution. 


\  45.  (I.)1  Where  a  creditor  has  issued  execution  against  the 
goods  or  lands  of  a  debtor,  or  has  attached  any  debt  due  to  him, 
he  shall  not  be  entitled  to  retain  the  benefit  of  the  execution  or 
attachment  against  the  trustee  in  bankruptcy  of  the  debtor,  un- 
less he  has  completed  the  execution  or  attachment  before  the 
date  of  the  receiving  order,  and  before  notice  of  the  *  pre- 
sentation of  any  bankruptcy  petition  by  or  against  the  debtor 
or  of  the  commission  of  any  available  act  of  bankruptcy  by  the 
debtor. 

(2.)  For  the  purposes  of  this  Act,  an  execution  against  goods  is 
completed  by  seizure  and  sale;  an  attachment  of  a  debt  is  com- 
pleted by  receipt  of  the  debt;  and  an  execution  against  land  is 
completed  by  seizure,  or,  in  the  case  of  an  equitable  interest,  by 
the  appointment  of  a  receiver  (n). 

\  46.  (I.)1  Where  the  goods  of  a  debtor  are  taken  in  execu- 
tion, and  before  the  sale  thereof  notice  is  served  on  the  sheriff 
that  a  receiving  order  has  been  made  against  the  debtor,  the  sher- 
iff shall,  on  request,  deliver  the  goods  to  the  official  receiver  or 
trustee  under  the  order,  but  the  costs  of  the  execution  shall  be 
a  charge  on  the  goods  so  delivered,  and  the  official  receiver  or 

(k)  5  M.  &  S.  336  ;  and  ante,  p.  672. 

(I)  4  B.  &  Ad.  633. 

(m)  See  Cooper  v.  Chittv,  1  Sm.  L.  C,  and  note  there. 

{n)  Heathcote  v.  Livesley,  19  Q.  B.  D.  285.  See  Re  Hobson, 
33  Ch.  D.  493.  as  to  elegit.  See  as  to  protected  seizures  not  be- 
ing executions.  Ex  parte  Dickin.  4  Ch.  D.  521.  and  Krehl  v. 
Great  Central  Gas  Co..  L.  R.  5  Ex.  289.  A  winding-up  order 
followed  by  the  appointment  of  an  interim  manager,  was  not  an 
execution  or  attachment  within  the  meaning  of  \  133  of  the  act 
of  1849,  Aitchison  v.  Lee,  3  Drew.  637,  654,  &c. ;  Aff.  3  Jur.  N. 
S.  95. 


See  note  (J),  page  628. 


CONSEQUENCES  AS  REGARDS  EXECUTION  CREDITORS.  745 

trustee  may  sell  the  goods  or  an  adequate  part  thereof  for  the  Bk.  IV. 
purpose  of  satisfying  the  charge.  Chap.  4. 

(2.)  Where  the  goods  of  a  debtor  are  sold  under  an  execution  c  '  ~" 
in  respect  of  a  judgment  for  a  sum  exceeding  twenty  pounds,  the 
sheriff  shall  deduct  the  costs  of  the  execution  from  the  proceeds 
of  sale,  and  retain  the  balance  for  fourteen  days,  and  if  within 
that  time  notice  is  served  on  him  of  a  bankruptcy  petition  hav- 
ing been  presented  against  or  by  the  debtor,  and  the  debtor  is  ad- 
judged bankrupt  thereon  or  on  any  other  petition  of  which  the 
sheriff  has  notice,  the  sheriff  shall  pay  the  balance  to  the  trustee 
in  the  bankruptcy,  who  shall  be  entitled  to  retain  the  same  as 
against  the  execution  creditor,  but  otherwise  he  shall  deal  with 
it  as  if  no  notice  of  the  presentation  of  a  bankruptcy  petition 
had  been  served  on  him. 

(3.)  An  execution  levied  by  seizure  and  sale  on  the  goods  of  a 
debtor  is  not  invalid  by  reason  only  of  its  being  an  act  of  bank- 
ruptcy, and  a  person  who  purchases  the  goods  in  good  faith  un- 
der a  sale  by  the  sheriff  shall  in  all  cases  acquire  a  good  title  to 
them  against  the  trustee  in  bankruptcy. 

The  above  clauses  apply  as  well  to  cases  where  one 
partner  is  bankrupt,  and  the  same  partner  is  the  exe- 
cution debtor,  as  to  those  where  all  the  partners  are 
bankrupt,  and  all  are  execution  debtors:  it  will  also  be 
probably  held  to  apply  where  one  partner  only  is  bank- 
rupt, and  the  execution  is  against  the  firm  for  a  part- 
nership debt  (o);  provided  the  Court  is  in  a  position 
to  ensure  a  proper  distribution  of  the  assets  of  the  firm 
amongst  the  creditors  thereof.  But  if  a  firm  carries  on  Cases  where 
business,  and  has  property  abroad,  and  some  of  the  some  part- 
partners  are  resident  *  there,  and  a  creditor  has,  by  [  *  676] 
proceedings  instituted  abroad  against  the  foreign  house,  n£rs  a*'e 
taken  its  effects  there  in  execution,  be  will  not  be  in- 
terfered with  by  the  courts  here,  at  the  instance  of  the 
trustee  of  a  bankrupt  member  of  the  firm  residing  in 
this  country  (p).  As  the  Court  in  such  a  case  cannot 
ensure  a  proper  distribution  of  the  partnership  assets 
amongst  all  the  creditors  of  the  firm,  it  will  not  de- 
prive any  of  those  creditors  of  the  advantages  which 
they  may  have  obtained,  and  to  which  they  are  enti- 
tled by  the  laws  of  another  country.  If,  however,  the 
creditor  has  received  more  than  the  amount  of  his  debt, 

(o)  Following  the  analogy  of  the  old  law,  sec  Barker  v.  Good- 
air,  11  Ves.  78,  and  Dutton  v.  Morrison,  17  Ves.  210.  See,  too, 
Be  Wait,  1  J.  &  W.  610;  Anon.  12  Mod.  446. 

(p)  See  Brickwood  v.  Miller,  3  Mer.  279.  Sec.  too.  the  excel- 
lent judgmenl  of  C.  J.  Eyre,  in  Phillips  v.  Hunter.  2  H.  Bl.  410. 
and  the  case  of  Waring  v.  Knight,  referred  to  by  him. 


746 


BANKRUPTCY. 


Bk.  IV. 

Chap.  4. 
Sect.  3. 


Right  of 
trustee  to 
part  of 
proceeds  of 
■sale  under 
execution. 


he  will  be  made  to  account  to  the  trustee  for  the  differ- 
ence (q). 

Before  the  Judicature  acts  it  was  held  that  where  A. 
and  B.  were  partners,  and  A.  committed  an  act  of 
bankruptcy,  and  a  separate  creditor  of  B.  took  the  part- 
nership property  in  execution,  and  sold  it,  A.'s  trustee, 
although  not  entitled  to  recover  the  property  sold,  or 
its  value,  was  entitled  to  part  of  the  proceeds  of  its 
sale;  and  in  the  absence  of  evidence  to  the  contrary,  to 
one-half  of  such  proceeds  (r).  If,  however,  the  trus- 
tee of  a  bankrupt  firm  sold  its  property,  a  creditor  who 
had  previously  issued  execution  against  that  property 
for  a  separate  debt  of  one  of  the  partners,  could  not  sue 
the  trustees  for  that  partner's  share  of  the  proceeds  of 
the  sale  (s).  The  effect  of  the  Judicature  act  on  such 
cases  as  these  has  been  already  considered  (t). 


[Section  III. — Of  the  Doctrine  of  Reputed  Ownership. 


Reputed 
ownership. 

[*677] 


Object  of 

above 

enactments. 


1.    Generally. 

From  the  time  of  James  the  First,  and  since,  it  has 
been  thought  proper  by  the  Legislature  to  declare  that 
upon  the  *  bankruptcy  of  any  trader  his  creditors  shall 
have  the  benefit  not  only  of  his  own  property,  but  also 
of  all  such  goods  of  other  people  as  at  the  time  of  his 
bankruptcy  are  in  his  possession,  order,  or  disposition, 
with  their  permission.  Under  the  old  acts  such  prop- 
erty did  not,  like  the  bankrupt's  own  property,  vest  in 
the  assignees;  but  an  order  for  sale  was  made,  and 
when  made,  was  retrospective,  and  enabled  them  or  the 
purchaser  from  them,  as  the  case  might  be,  to  sue  for 
the  goods  (it).  Under  the  Bankruptcy  act,  1883,  how- 
ever, this  distinction  does  not  appear  to  exist  (x). 

The  object  of  these  enactments  is  to  prevent  a  trader 
from  obtaining  undue  credit  by  being  allowed  to  parade 
as  his   own,  property  which  in    fact  belongs  to  other 

(q)  Brickwood  ?•.  Miller,  :'»  Mer.  284. 

,  Mayhew  v.  Herrick,  7  C.  B.  229.  Compare  Morgan  v. 
Marquis.  9  Ex.  145. 

(s)  Garbett  v.  Veale,  5  Q.  B.  408. 

(t)   Ante,  book  iii.  c.  5.  \  4. 

i  u  )  The  order  might  be  made  retrospectively,  as  in  Me  Heslop, 
1  De  G.  M.  &  G.  477.  See.  as  to  the  order  for  sale,  Quarter- 
maine  v.  Bittleston,  13  C.  B.  133:  Freshuey  v.  Carrick,  1  H.  & 
N.  653;  and  as  to  its  conclusiveness.  Graham  v.  Furber,  14  C.  B. 
134:  Ex  parte  Wood.  4  De  G.  M.  &  G.  861 ;  and  as  to  restraining 
a  sale  under  it.  Mather  v.  Lav,  2  J.  &  H.  374. 

(x)  46  &  47  Viet.  c.  52,  §  44  (iii.)  and  I  54. 


REPUTED  OWNERSHIP.  747 

people  ;  and  notwithstanding  the  very  general  language  Bk.  IV. 
of   the  enactments,  their  application  has  always  been  g£*3 

controlled  by  a  reference  to  the   mischief   which   they 1_! 

were  designed  to  prevent  ;  and  as  the  habits  of  a  trad- 
ing community  vary,  it  may  well  happen  that  circum- 
stances which  are  at  one  time  calculated  to  deceive  are 
not  so  at  another.  Whether,  therefore,  property  in  the 
possession  of  a  bankrupt,  but  not  belonging  to  him,  will 
pass  to  his  trustee  by  virtue  of  the  doctrine  of  reputed 
ownership,  will  depend  upon  the  circumstances  under 
which,  and  the  purposes  for  which,  they  are  in  his  pos- 
session (y). 

By  the  Bankruptcy  act,  1883  the  reputed  ownership 
clause  is  as  follows  : — §  44 '  enacts  that  the  property  of 
a  bankrupt  divisible  amongst  his  creditors,  shall  in- 
clude,— 

(iii.)  All  goods  being,  at  the  commencement  of  the  bankruptcy, 
in  the  possession,  order  or  disposition  of  the  bankrupt, 
in  his  trade  or  business,  by  the  consent  and  permission 
of  the  true  owner,  under  *such  circumstances  that  he  is  [  *678] 
the  reputed  owner  thereof  :  provided  that  things  in  ac- 
tion other  than  debts  due  or  growing  due  to  the  bank- 
rupt in  the  course  of  his  trade  or  business,  shall  not  be 
deemed  goods  within  the  meaning  of  this  section  (z). 

Upon  this  enactment  the  following  observations  re- 
quire attention  : — 

First,  as  to   the  property. — The  reputed-ownership  i.  Property 
clause  does  not  extend  to  land  or  any  interest  therein  ;  must  be 
and  not  therefore  to  leaseholds  (a),  equities  of  redemp-  personal, 
tion  or  the  like   (b)\   nor  to   fixtures,  even  though   re- 
movable as  between  landlord  and  tenant  (c).     But  with 
the  exception  of  choses  in  action  other  than  debts   due 

(y)  See  as  to  customs  of  trade,  &c,  E.c  parte  Brooks,  23  Ch. 
D.  261  ;  Ex  parte  Turquand,  14  Q.  B.  D.  636:  Ex  parte  Wing- 
field,  10  Ch.  D.  591  :  Ex  parte  Vaux,  9  Ch.  602;  Ex  parte  Wat- 
kins.  8  ib.  520  :  Priestley  v.  Pratt.  L.  R.  2  Ex.  101  :  Ryall  v. 
Rowles.  1  Yes.  S.  348  ;  Joy  v.  Campbell,  1  Sch.  &  Lef.  328  :  Ham- 
ilton v.  Bell,  10  Ex.  545  ;  Horn  v.  Baker,  9  East,  215,  and  2  Sm. 
L.  C. 

(z)  46  &  47  Vict.  c.  52.  '',  44  (iii),  and  see  \  168  lor  the  defini- 
tion of  goods  and  property. 

(a)  Roe  r.  Galliers,  ■>  T.  P.  133. 

(b)  Jones  v.  Gibsons.  !)  Yes.  407.  But  as  to  money  directed 
to  be  raised  by  sale  or  mortgage,  see  Re  Hughes,2  Hem.  &  M.  89. 

(c)  Horn  v.  Baker,  0  Easl  215,  and  2  Sm.  L.  C;  Whitmore  v. 
Empson.  23  Beav.  313  :  Mather  v.  Fraser,  2  K.  &  J.  536  :  Ex  parte 
Scarth,  1  M.  D.  &  D.  240;  E.r  parte  Cotton.  2  ib.  725;  Boydell 
v.  McMichael,  1  Cr.  M.  &  R.  177  ;  Ex  parte  Wilson,  4D.&C.  143. 

1  See  note  (I)  p.  628. 


748  BANKRUPTCY. 


Bk.  IV.  to  the  bankrupt  in  respect  of  his  trade  or  business,  all 

Chap.  4.  pure  personal  estate  is  included  in  the  clause  (d).     It 

'    includes,  for  example,  ships,  notwithstanding  the  regis- 
try acts  (e). 
Choses  in  Debts  due  to  the  bankrupt  in  respect  of  his  trade  or 

action.  business  (/)  are  within  the  operation   of  the  clause. 

But  all  other  choses  in  action   are  excepted,   e.  g.,  de- 
bentures (g),  policies  of  insurance  (h),  shares  in  part- 
nerships (i),  shares  in  companies  (k)  and  equitable  in- 
terests therein  (/). 
[  *  679]  *  Secondly,  as  to  the  order  and  disposition. — The  act 

2.  Property  requires  that  the  goods  and  chattels  shall  be  in  the 
theTorder  or  bankrupt's  possession,  order,  or  disposition  as  reputed 
disposition  of  owner.  Goods  therefore  which  are  in  the  bankrupt's 
the  bank-  possession,  but  not  as  reputed  owner,  are  not  within 
rupt.  ^he  ciause  (m).     On  the  other  hand,  actual  possession 

on  the  part  of  the  bankrupt  is  not  necessary.  If  the 
goods  are  in  the  hands  of  a  servant  of  a  bankrupt  or  in 
the  possession  cf  a  third  party,  to  whom  the  bankrupt 
has  lent  them,  and  who  is  bound  to  return  them  when 
required,  they  are  in  the  bankrupt's  order  and  disposi- 
tion (n).  But  if  goods  are  in  the  possession  of  a  third 
party  who  is  entitled  to  a  lien  upon  them,  the  trustee  is 
not  entitled  to  the  goods  as  being  in  the  bankrupt's 
possession  (o). 
Bills  ot  Nor  does  the  registration  of  a  bill  of  sale  necessarily 

sale'  (d)~See R7yallV~Rowles,  1  Ves.   S.   348,   as  to  debts  ;   Horn- 

blower  v.  Proud.  2  B.  &  Ad.  329,  as  to  negotiable  instruments  ; 
Edwards  i\  Martin,  1  Eq.  121. 

(e)  Monkhouse  v.  Hay,  2  Brod.  &  Bing.  114,  affirming  Hay  v. 
Fairbairn,  2  B.  &  A.  193:  Robinson  v.  MacDonnell,  5  M.  &  S. 
228  ;  Ex  parte  Burn,  1  Jac.  &  W.  378  ;  Ex  parte  Batsou.  Cooke's 
Bank.  L.  355,  ed.  8. 

(/)  I.  c,  debts  connected  with  his  trade,  not  all  debts  con- 
tracted whilst  he  is  a  trader.  See  Ex  parte  Rensburg,  4  Ch.  D. 
685  ;  Ex  parte  Kemp.  9  Ch.  383. 

(q)  Ex  parte  Rensburg,  4  Ch.  D.  (185. 

(h)  Ex  parte,  Ibbetson,  8  Ch.  D.  519. 

(i)  Ex  parte  Fletcher,  8  Ch.  D.  218.  See,  also.  Longman  v. 
Tripp,  2  Bos.  &  P.,  N.  S.  67  :  Ex  parte  Foss,  2De  G.  &  J.  230. 

(k)  Whinney  v.  Colonial  Bank,  11  App.  Ca.  426,  reversing  S. 
C.  30  Ch.  D.  261,  and  overruling  Ex  parte  Union  Bank  ot  Man- 
chester, 12  Eq,  354.     Older  decisions  may  now  be  disregarded. 

(/)  Exparte  Barry,  17  Eq.  113. 

(m)  See  Priestley  v.  Pratt,  L.  R.  2  Ex.  101,  where  the  goods 
were  left  with  the  bankrupt  for  the  owner's  convenience.  See, 
also,  Shrubsole  v.  Sussams,  16  C.  B.  N.  S.  452,  where  the  bank- 
rupt's name  had  been  painted  out  from  over  his  own  shop. 

(»)  Hornsby  v.  Miller.  1  E.  &  E.  192. 

(o)  See  Greening  v.  Clarke,  4  B.  &  C.  316;  Ex  parte  Arbouin, 
De  G.  359;  Ex  parte  Taylor,  Mont.  240;  and  compare  Hoggardr. 
Mackenzie,  25  Beav.  493,  where  the  person  setting  up  the  lien 
was  only  a  servant  of  the  bankrupts. 


REPUTED  OWNERSHIP.  749 

prevent  the  goods  comprised  in  it  from  remaining  Bk.  IV. 
in  the  order  and  disposition  of  the  vendor  or  niort-  £h£ip\>4" 
gagor  (p). 


Debts  are  deemed  to  be  in  the  possession,  order,  or  As  to  debts, 
disposition  of  him  who  has  the  power  of  giving  a  valid 
discharge  for  the  money  payable  in  respect  of  them, 
and  of  transferring  them  in  the  market  without  excit- 
ing suspicion.  Consequently  a  mere  assignment  of 
debts,  although  it  may  be  valid  enough  between  the 
assignor  and  the  assignee,  will  not  have  the  effect  of 
takino-  them  out  of  the  order  and  disposition  of  the 
former.  To  effect  this,  notice  of  the  assignment  must 
be  given  to  the  debtor  (q). 

What  amounts  to  a  sufficient  notice  of  an  assignment  As  to  the 
is  often  not  easy  to  decide.      It  seems,  however,  that  it  sufficiency  of 
.     .  .i,i  ,i  ,•       •        •  /    \      ,i     ,        the  notice, 

is  immaterial  by  whom  the  notice  is  given  (r );  that  a 

verbal  communication,  *if  given  in  the  course  of  busi-  [  *  680]  . 
ness,  is  as  effectual  as  a  written  notice  (s);  that  notice 
by  advertisement,  if  seen  by  the  person  to  whom  notice 
ought  to  be  given.,  is  sufficient  (t):  and  that  notice  to 
one  partner  is  notice  to  the  firm  (u);  and  notice  to  one 
director  or  officer  of  a  company,  whose  duty  it  is  to  re- 
ceive it  and  act  upon  it  or  communicate  it  to  the  com- 
pany, is  notice  to  the  company  (as);  provided  that  such 
director  or  officer  is  not  the  person  whose  interest  in 
the  company  is  the  subject-matter  of  the  transaction  to 
be  notified  (y). 


(p)  Badger  v.  Shaw,  2  E.  &  E.  472:  Stansfeld  v.  Cubitt,  2  De 
G.  &  J.  222.  Compare  Ex  parte  Hooman,  10  Eq.  63;  Ashton  v. 
Blackshaw,  9  Eq.  510. 

{q)  Ryall  v.  Rowles,  1  Ves.  S.  348;  Ex  parte  Monro,  Buck,  300. 

(r)  See  Ex  parte  Agra  Bank,  3  Ch.  555:  Re  Rawbone,  3  K.  &  J. 
300;  Re  Langmead,  20  Beav.  20. 

(s)  Alletsou  v.  Chichester,  L.  R.  10  C.  P.  319;  Ex  parte  Agra 
Bank,  3  Ch.  555;  North  British  Insur.  Co.  v.  Hallett,  7  Jur.  N. 
S.  1263;  Re  Shelley,  4  De  G.  J.  &  S.  543;  Ex  parte  Richardson, 
M.  &  Ch  43;#Gale  v.  Lewis,  9  Q.  B.  730.  Mere  casual  knowledge 
by  a  secretary  is,  however,  not  enough.  Societe  Generale  de 
Paris  v.  Tramways  Union  Co.,  14  Q  B.  D.  424.  and  11  App.  Ca. 
20;  Re  Barr's  Trust.  4  K.  &  J.  219;  Ex  parte  Watkins,2  M.  &  A. 
348;  Ex  parte  Burbridge,  1  Deac.  131;  Edwards  t<.  Martin,  1  Eq. 
121. 

{t)  Lloyd  v.  Banks,  3  Ch.  488. 

(u)  Ante,  p.  141. 

(x)  Alletson  v.  Chichester,  L.  R.  10  C.  P.  319;  Browne  v.  Sav- 
age, 4  Drew.  635;  Ex  parte  Richardson,  M.  &  Ch.  43;  Gale  v. 
Lewis,  9  Q.  B.  730;  Pinkett  v.  Wright,  2  Ha.  120.  Notice  tothe 
liquidator,  if  the  company  is  being  wound  up,  is  sufficient. 
Wragge's  case,  5  Eq.  284;  and  see  ante,  p.  143. 

(y)  Browne  v.  Savage,  4  Drew.  635;  Ex  parte  Nutting,  2  M.  D. 
&  D.  302;  Ex  parte  Boulton,  1  De  G.  &  J.  163.  Compare  Re 
Shelley,  4  De  G.  J.  &  S.  543;  Duucau  v.  Chamberlayne,  11  Sim. 


7:0  BANKRUPTCY. 

Bk.  IV.  Notice  of  a  dissolution  of  partnership,  and  that  one  of 

Chap.  4.  ^e  partners  will  receive  and  pay  all  debts,  is  not  notice 

Sect-  3"  that  he  alone  is  entitled  to  receive  payment  of  the  debts 

Notice  of        due  to  the  firm,  and  is  therefore  insufficient  to  take  such 

dissolution      debts  out  of  the  reputed  ownership  of  the  firm  (z). 

°f  partner-  Thirdly. — The  act  requires  that  the  goods  shall  be  in 

3  ?n  his         the  Posses8ioD>   &c->   of  tbe  bankrupt  in  his  trade  or 

trade  or  business.     This  is  important.     What  is  in  a  person's 

business.         trade  or  business  depends  on  what  he  trades    in   or 

what  his  business  is,  and  on  where  the  particular  goods 

are  (a). 

4.  Property         Fourthly,  as  to  the  time,  of  possession. — The  reputed- 

[*681]        ownership  *  clause  only  extends  to  goods  and  chattels 

must  be  in      in  the  bankrupt's  order  and  disposition  at  the  time  of 

possession  of  the  commission  of  the  act  of  bankruptcy  to  which  the 

tTtimfof    adjudication   relates    (6).       Therefore,    although    such 

Ms  bank-        property  may  have  been  left  in  the  bankrupt's  order 

ruptcy.  and  disposition  for  a  long  time,  and  although  he  may 

thereby  have  acquired  a  false  credit,  still,  if  before  he 

has  committed  an   act  of  bankruptcy,  they  have  been 

taken  out  of  his  order  and  disposition,  his  trustee  will 

have  no  claim  to  them  (c). 

In  a  case  where  the  goods  of  one  partner  were  in 

the  order  and  disposition  of  the  firm,  but  were  insured 

in  the  name  of  their  owner,  and  the  goods  were  burnt, 

and  afterwards  the  firm  became  bankrupt,  the  proceeds 

of  the  policy  were  held  not   to  form  part  of  the  joint 

estate  of  the  firm,  although  the  goods  themselves  would 

have  done  so  had  they  continued  undestroyed  (d). 

Bona  fide  The  effect  of  removing  goods  from  the  order  and 

dealings  disposition  of  a   bankrupt   after  he  has  committed  an 

without  act   of  baukruptcy,   turns  on  the  bona  fides  of  their 

bankruptcy,    owner,  and  on  his  knowledge  or  ignorance  of  the  act  of 

123;  Thompson  v.  Speirs,  13  Sim.  469;  Ex  parte  Wilkinson,  ib. 
475;  Ex  parte  Rose,  2  M.  D.  &  D.  131,  must  be  considered  over- 
ruled. 

(z)  Ex  parte  Burton,  1  01.  &  J.  207;  Ex  parte  Usborne,  ib.  358; 
Ex  parte  Sprague,  4  De  O.  M.  &  O  866.  Compare  Ex  parte 
Woodgate,  2  M.  D.  &  D.  304 

(a)  See  Ex  parte  Lovenng,  24  Ch.  D.  31;  Ex  parte  Sully.  14  Q. 
B.  D.  930.  See,  also.  Colonial  Bank  v.  Whinney,  30  Ch.  D.  261; 
Ex  parte  Nottingham  Bank,  15  Q.  B.  D   441. 

(b)  See  46 &  47  Vict.  c.  52,  U  43  and  44  liiiV 

re)  See  Ex  parte  Phillips,  4  Ch.  D  496;  Stansfeld  v.  Cubitt,  2 
De  O.  &  J.  222;  Jones  v.  Dwyer,  15  East,  21:  Smith  v.  Topping, 
5  B.  &  Ad.  674;  Price  v.  Groom.  2  Ex  542;  Ex  parte  Foss,  2  De 
G  &  J.  230;  Sinclair  v.  Wilson.  20  Beav.  324.  See,  also,  Ex  parte 
Littledale.  6  De  G.  M.  &  G.  714;  Ex  parte  Masterman,  4  D.  & 
Ch.  751,  which  related  to  shares. 

[d)  Ex  parte  Smith,  Buck  149,  and  3  Madd.  63;  and  see  Ex 
parte  Browne,  6  Ves.  136;  Ex  parte  Parry,  5  ib.  575. 


REPUTED  OWNERSHIP.  751 


bankruptcy  ;  for  it  is  held  that  a  removal  of  goods  is  a  Bk.  IV. 
dealing  or  transaction  within  the  meaning  of  the  pro-  ^  ap.  4. 

tecting  clauses  (e),     Consequently,  although  a  person's  '  e  

goods  and  chattels  may  be  with  his  consent  in  the  order 
and  disposition  of  a  trader  who  commits  an  act  of  bank- 
ruptcy, yet,  if  such  person  afterwards,  bond  fide  and 
without  notice  of  such  act  of  bankruptcy,  takes  those 
goods  out  of  the  trader's  order  and  disposition,  they 
will  be  protected  from  the  claims  of  his  trustee  (/). 

*  Fifthly,  as  to  the  consent  of  the  true  owner. — Goods  [  *  682] 
and  chattels  which,  at  the  time  of  the  commission  of  an  5.  Property 
act  of  bankruptcy  by  a  trader,  are  in  his  order  and  dis-  mus* 1)e  in 
position,  in  fraud  of,  or  against,  or  without  the  will  of  no^ession8 
the  true  owner,  are  not  within  either  the  words  or  the  wjth  the 
spirit  of  the  reputed-ownership  clause   (g).     After  a  consent  of 
bona,  fide  demand  by  the  owner  to  have  the  goods  re-  tne  true 
stored  to  him,  they  cannot   be   said  to  remain  with  his  owner- 
consent,  or  by  his  permission,  in  the  possession  of  the 
bankrupt  ;  and   although,  therefore,  they  .do  continue 
in  his  possession  until  he  becomes  bankrupt,. his  trustee 
must  restore  them  (h). 

The  expression  true  owner  includes  creditors  having  ^y^o  are  con- 
an  equitable  or  legal  charge  or  lien  upon  goods  and  sidered  true 
chattels  left  by  their  consent  in  the  order  and  disposi-  owners, 
tion  of  the  bankrupt  (i).     Consequently,   the   liens  of 
such  persons  on  goods  so  left   are  lost  in  the  event  of 
the  bankruptcy  of  their  debtor  (k). 

Having  now  alluded  to  the  circumstances  required  to  Cases  to 
bring  a  case  within  the  reputed-ownership  clause,  it  is  which  the 
proposed  to   advert  shortly  to  the  non-application  of  doctr/nes  of 
that    clause  to  property  which,   although   apparently  ownership 
within  its  words,  is  not  within  its  spirit.  do  not 


(e)  As  to  which,  see  ante,  p.  60'4,  and  Isitt  v.  Beeston,  L.  R.  4 
Ex.  15!). 

(/)  /ZeStyan,  1  Ph.  105;  Graham  v.  Father,  14  C.  B.  134; 
Brewm  v.  Short,  5  E.  &  B.  227.  See,  too,  Ex  parte  Dobson,  2 
M.  D.  &  D.  685,  and  Burn  v.  Carvalho,  4  M.  &  Cr.  690. 

(g)  Ex  parte  Ward,  8  Ch.  144  ;  West  v.  Skipp,  1  Ves.  S.  239; 
Ex  parte  Richardson,  Buck,  480.  See,  also,  Acraman  v.  Bates,  2 
E.'  &  E.  456,  as  to  goods  at  sea. 

(h)  Ex  parte  Ward,  8  Ch.  144;  Smith  v.  Topping,  5  B.  &  Ad. 
674  ;  Brewin  v.  Short,  5  E.  &  B.  227  ;  Re  Slee.  15  Eq.  69.  As  to 
the  eftect  of  giving  instructions  to  demand,  see  Ex  parte  Phillips, 
4  Ch.  D.  496. 

(i)  Ryall  v.  Rowles,  1  Ves.  S.  348  ;  Hornsby  v.  Miller,  1  E.  & 
E.  192  ;  Be  Slee,  15  Eq.  69. 

(k)  See  last  note,  and  Hoggard  v.  Mackenzie,  25  Beav.  493; 
and  see  as  to  morgages  by  deed  when-  the  mortgagor  retains  pos- 
session, Freshney  v.  Carrick,  1  H.  &  X.  653;  Spackman  o.  Miller, 
12  C.  B.  N.  S.  659,  and  Ex  parte  Harding,  15  Eq.  223,  where  the 
hill  of  sale  was  registered. 


apply. 


752  BANKRUPTCY. 

Bk.  IV.  The   doctrine  of  reputed  ownership  is   confined  to 

Chap.  4.  those  cases  in   which  possession  of  the  goods  by  the 

t-    '  bankrupt   is    not    justified    by   any   known    custom   of 

Property  in     trade  (I),  nor  by  any  bond  fide  purpose  requiring    him 
possession  of  ^0  h.ave   them   under   his   control    (m).     If,  therefore, 
r*  pqqi  01  *  goods  are   entrusted  to  factors  or  brokers  or  known 
legitimate      agents  to  be  disposed  of  by  them  in  the  ordinary  course 
purposes.        of  trade,  and  they  become  bankrupt,  such  goods  do  not 
pass  to  their  trustees  ;  for  the  possession  of  the  goods 
were  not  calculated  to  deceive  any  one  conversant  with 
mercantile  operations  (n). 
Trust  pro-  So,  again,  property  vested  in  one  person  in  trust  for 

perty.  another  does  not  on  the  bankruptcy  of  the  trustee  be- 

come divisible  amongst  his  creditors,  either  under  the 
reputed  ownership  clause  or  otherwise  (o).  But  the 
trust  must  be  a  bond  fide  trust,  and  not  fraudulent,  i. 
e.,  not  created  for  the  purpose  of  giving  the  trustee  the 
apparent  ownership  in  order  to  conceal  the  true  state 
state  of  things  (p). 
Goods  held  In  conformity,  however,  with  the  general  rule  relat- 

for  specific      ing  to  trust  property,  where  goods  and  chattels  are  in 
purpose.  the  hands  of  a  bankrupt,  in  order  that  he  may  apply 

them  for  a  specific  purpose,  e.  g.,  in  payment  of  debts 
owing  to  him  by  the  owner  of  the  goods,  the  trustee  in 
bankruptcy  must  so  apply  them,  notwithstanding  the 
reputed  ownership  clause  (q). 

2.  Particularly  as  regards  partners. 

Application         The  preceding  general  notice  of  the  doctrine  of  re- 

of  doctrine  of  puted  ownership  will,  it  is  hoped,  suffice  to   render  its 

reputed  application  to  partners  readily  intelligible.     So  far  as 

ownership  to  part,ners  are  concerned,  the   doctrine  in  question    de- 
partners.         r ; * 

(/)  Ante,  p.  677,  note  (y). 

(m)  .See  Priestley  v.  Piatt,  L.  R.  2  Ex.  101  ;  Hamilton  v.  Bell, 
10  Ex.  545;  Joy  v.  Campbell,  1  Sell.  &  Lef.  328;  Holderuess  v. 
Eankin,  2  De  G.  F.  &  J.  258. 

(»)  See  Ex  parte  Bright,  10  Ch.  D.  506  ;  Ex  parte  Wingfield,  ih. 
591 ;  Ex  parte  Flyn,  1  Atk.  185  ;  Collins  v.  Forbes,  3  T.  R.  316, 
and  the  cases  in  the  last  note.  Compare  Ex  parte  Buck.  3  Ch. 
D.  795,  where  the  bankrupt  was  not  known  to  be  a  factor. 

(o)  46  &  47  Vict.  c.  52,  \  44,  cl.  1  ;  Joy  v.  Campbell,  1  Sch.  & 
Lef.  328;  Exparte  Greaves,  8  De  G.  M.  &  G.  291  ;  Bankhead's 
Trusts,  2  K.  &  J,  560  ;  Ex  parte  Gillett,  3  Madd.  28;  Ex  parte 
Martin,  19  Ves.  491  ;  Exparte  Smith,  4  D.  &  Ch.  579. 

(p)  Ex  parte  Watkins,  2  M.&  A.  348,  S.  C.  Ex  parte  Burbridge, 
1  Deac.  131,  reversing  Ex  parte  Watkins,  4  Peac.  &  Ch.  87.  See, 
also,  Ex  parte  Old.  2  M.  &  A.  724  ;  Exparte  The  Lancaster  Canal 
Co.,  Mon.  &  Bl.  94,  and  further,  as  to  secret  trusts,  per  Law- 
rence, J.,  in  Horn  v.  Baker,  9  East,  215,  and  2  Sm.  L.  C. 

(q)  Exparte  Brown,  3  M.  &  A.  471.    See  other  cases,  ante,  p.  653. 


REPUTED  OWNERSHIP.  753 

rives  its  chief  importance  from  the  effect  it  produces  Bk.  IV. 
on  the  distribution  of  their  assets  ;  for  it  *  results  from  Chap.  4. 
the  reputed  ownership  clause,  that  in  the  event   of  the 


bankruptcy  of  a  firm,  whatever  is  in  ihe  reputed  own-  [  *  684] 
ership  of  the  firm  is  distributable  as  its  joint  estate, 
whilst  whatever  is  in  the  reputed  ownership  of  some 
individual  partner  is  distributable  as  his  separate  estate. 
And  this  rule  prevails  over  all  others  ;  for  when  a  case  Effect  ol 
of  reputed  ownership  is  once  established,  it  is  not  of  the  doctrine  on 
least  consequence  to  whom   the  property   in  question  ^*°  r^t° 
really  belongs.     As  an  instance  of  this,  reference  may  estate. 
be  made  to  Ex  parte  Hare  (r),  in  which  furniture  be   Ex  parte 
longing  to  one  partner  only,  but  kept  in  the  office  of  Hare, 
the  firm,   and  used  there  as  part  of  the   partnership 
effects,  was,  on  the  bankruptcy  of  the  firm,  distributed 
as  joint  estate.     The  same  principle,  probably,  led  to 
the  decision  in  Ex  parte  Hunter    (s),  in   which   there  Ex  parte 
were  three  partners,  but  one  of  them  had  no   interest  Hunter, 
whatever  in  anything  except  the  profits  ;  it  was  con- 
tended that  under  these  circumstances  there  was  no  joint 
property  of  the  three,  but  it  was  held  that  the  property 
of  the  two  must  be  distributed  as  if  it  were  the  prop- 
erty of  the  three. 

Again,  if  goods  and  chattels  are  in  the  reputed  own-  Liens 
ership  of  one  or  more  partners,  the  liens  of  the   other  destroyed  by 
partners  upon  such  goods  and  chattels  will  be  overridden  doctrine  of 
in  favour  of  the  creditors  of  those  in  whose  order  and  reputed  • 
disposition  the  goods  and  chattels  were  at  the  time  of 
the  bankruptcy  (t).     Thus,  in  the  case  of  Hoggard  v.  Hoggard  v. 
Mackenzie  (u),  where  a  Scotch  firm  had  an  establish-  Mackenzie, 
ment  in  London,  which  was  conducted  in  its  name  by  a 
manager,  who  had  a  lien  on  the  goods  consigned  to  him 
by  his  principals  for  advances  made  by  him,  it  was  held, 
on  the  bankruptcy  of  the  firm,  that  goods  in  the  pos- 
session of  the  manager  were  in  the  reputed  ownership 
of  the  firm,  and  that  his  lien  could  not  prevail  against 
the  assignees. 

As  a  general  rule,  however,  property  of  the  firm  in  the  possession  of 
possession  of  one  partner  for  the  purposes  of  the  part    one  partner 
nership  is  not  in  his  order  and  disposition  so  as  to  form  generally 
part  of  his  *  separate  estate  ;  he  is  himself  a  true  owner  L     o°oj 
and  his  possession  is  that  of  the  firm  (x).  thefinQm  °f 

(r)  1  Deac.  16  ;  2  Mont.  &  A.  478,  per  Erskine,  C.  J.  Sir  J. 
Cross  thought  the  furniture  was  in  point  of  fad  partnership 
property.     Compare  Ex  parte  Murton,  1  M.  D.  &  D.  252. 

(s)  2  Rose,  382. 

{t\  See  Kvall  v.  Howies,  1  Atk.  184. 

(«)  25  Beav.  493. 

(.i)  See  infra,  for  cases  showing  this  to  be  so. 
*  25  LAW   OF   PARTNERSHIP. 


754 


BANKRUPTCY. 


Bk.  IV. 
Chap.  4.  Sect. 
3. 

No  joint 
estate  created 
where  one 
partner  only 
is  bankrupt. 


1.  Reputed 
ownership 
where  there 
has  been  a 
change  in 
the  firm. 
Property  of 
old  firm  con- 
tinuing in 
its  reputed 
ownership. 


Ex  parte 
Burton. 


[  *  686] 


But  the  doctrines  of  reputed  ownership  only  apply 
to  that  which  is  in  the  order  and  disposition  of  a  bank- 
rupt; whilst,  therefore,  if  one  partner  only  is  bank- 
rupt the  joint  estate  of  the  firm  may  possibly  be  treat- 
ed as  his  separate  estate  by  being  in  his  order  and  dis- 
position (?/),  his  separate  estate  cannot  be  treated  as 
joint  estate  by  reason  of  its  being  in  the  order  and  dis- 
position of  himself  and  his  co-partners  (z). 

The  application  of  the  doctrine  of  reputed  ownership 
to  partners,  seldom  presents  peculiar  difliciilties,  except 
when  there  has  been  a  change  in  the  firm,  or  where 
there  is  a  dormant  partner;  but  its  application  in  these 
cases  requires  special  notice. 

First,  where  there  has  been  a  change  in  the  firm. — It 
follows  from  the  principles  examined  in  the  preceding 
pages,  that  a  mere  change  in  the  firm,  whether  by  the 
introduction  of  a  new  or  the  retirement  of  an  old  part- 
ner, does  not  necessarily  cause  a  change  in  the  reputed 
ownership  of  the  property  of  the  old  firm.  This  is  par- 
ticularly true  of  debts  owing  to  the  old  firm,  and  of 
merchandise  belonging  to  it,  but  in  the  hands  of  third 
persons;  and  there  is  abundant  authority  to  show  that 
debts  and  goods  left  in  the  reputed  ownership  of  the 
old  firm,  although  in  fact  belonging  to  the  new  firm, 
must,  in  the  event  of  bankruptcy,  be  treated  as  the 
joint  estate  of  the  old  firm. 

In  Ex  parte  Burton  (a)  a  firm  of  three  partners,  A., 
B.,  and  C,  was  dissolved.  A.  continued  the  partner- 
ship business,  and  the  debts  due  to  the  firm  were  as- 
signed to  him  by  B.  and  C.  The  dissolution  was  ad- 
vertised, and  the  advertisement  stated  that  all  debts  by 
or  to  the  firm  would  be  paid  or  received  by  A.  No 
other  notice  of  A.'s  exclusive  title  to  the  debts  was 
given.  A.  became  bankrupt,  and  shortly  afterwards  A., 
B.,  and  C.  became  bankrupt.  It  was  held  that  the 
debts  assigned  to  A.  *  were  in  the  reputed  ownership 
of  A.,  B.,  and  C. ;  for  although  A.,  as  a  partner,  was 
entitled  to  receive  the  debts  without  reference  to  the 
assignment,  still,  until  notice  of  that  assignment  was 
given  to  the  debtors,  they  were  as  much  at  liberty  to 
pay  their  debts  to  B.  or  C.  as  to  A. 


(y)  It  cannot  be  so  treated  if  the  joint  estate  is  in  the  joint 
possession  of  all  the  partners,  Ex  parte  Dorman,  8  Ch.  51.  See, 
also,  Ex  parte  Fletcher.  H  Ch.  D.  218. 

(z)  See  Ex  parte  Taylor,  2  M.  D.  &  D.  753. 

(a)  1  Gl.  &  J.  207.  See,  too,  Ex  parte  Usborne,  ib.  358;  Ex 
parte  Hawtrey,  7  Jnr.  71 ;  Ex  parte  Leaf.  1  Deac.  176,  where  one 
member  of  the  old  firm  had  died. 


REPUTED  OWNERSHIP.  755 

So,  in  Ex  parte  Sprague  (b),  a  firm  of  A.  and  B.  dis-  Bk.  IV. 
solved  partnership;  the  dissolution   was  advertised   in  Chap.  4. Sect. 

the  Gazette;  and  the  debtors   of  the   firm  were,  by   a  _! , 

circular,  requested  to  pay  their  debts  to  A.  The  debts  Ex  parte 
due  to  the  firm  were,  in  fact,  awarded  to  A.  by  an  ar-  Sprague. 
bitrator  appointed  by  him  and  B.  to  determine  the 
terms  of  dissolution.  On  the  subsequent  bankruptcy 
of  A.,  and  of  A.  and  B.,  it  was  held  that  the  debts  due 
to  A.  and  B.  were  in  the  order  and  disposition  of  the 
firm;  for  its  debtors  had  had  no  notice  that  A.  had  be- 
come solely  entitled  to  those  debts,  the  circulars 
amounting  to  no  more  than  a  request  that  the  debtors 
would  pay  their  debts  to  A.  on  behalf  of  the  firm. 

So  with  goods.  If  one  of  two  partners  retii'es  and  Ex  parte 
assigns  his  share  and  interest  in  the  partnership  prop-  Harris, 
erty  to  the  other,  and  part  of  that  property  consists  of 
goods  in  the  docks  or  at  a  wharfingers,  and  notice  of 
the  assignment  is  not  given  to  the  custodian  of  the 
goods,  they  will,  on  the  bankruptcy  of  the  two  part- 
ners, be  treated  as  forming  part  of  the  joint  estate,  and 
not  as  part  of  the  separate  estate  of  the  partner  to  whom 
they  were  assigned  (c). 

On  the  other  hand,  if  proper  notice   of  a  change  of  Reputed 
ownership  is  given,  that  which  was  the  property  of  the  ownership  of 
old  firm  will  become  part  of  the  estate  of  the  new  firm.  °.  ;  hrn? 
Further,  if  A.  is  the  owner  of  goods  in  the  custody  of  a  w  DOtice. 
third  person,   and  A.   takes  B.   into  partnership  with 
him,  and  gives  notice  to  such  person  to  hold  the  goods 
for  A.  and  B.,  instead  of  for  A.  as  formerly,  and  then 

A.  and  B.  become  bankrupt,  those  goods  will  be  treat- 
ed as  in  the  reputed  ownership  of  A.  and  B.,  although 

B.  may  have  been  a  merely  nominal  partner,  having  no 
share  in  the  assets  of  the  partnership  (d);    nor  will  a 

lien  on  *  the  goods  in  favour  of  the  person  in  whose  [  *  687] 
possession   they  are,  affect  the  result,  as  between   the 
estates  of  A.,  and  of  A.  and  B.  (e). 

It  has  already  been  seen  that  the  doctrine  of  reputed  Property  of 
ownership  only  applies  where  a  bankrupt's  possession  °hl  firm  not 
of  goods  is  not  justified  by  any  bond  fide  purpose  re-  in     ,e, 
quiring  him  to  have   them   in  his  custody  (f).     This  o^ership'tff 
principle  is  peculiarly  applicable  to  partners;  for  the  continuing 
possession  by  one  partner  of  the  goods  of  the  firm  may  partners : 


(6)  4  De  G.  M.  &  G.  866;  compare  Ex  parte  Woodgate.  2  M.  & 
D.  394,  as  to  the  sufficiency  of  the  notice  in  this  case. 

(c)  Ex  parte  Harris,  1  Madrl.  583. 

(d)  Ex  parte  Arbouin,  De  Gex,  359. 

(e)  Ibid. 

(/)  Ante,  p.  682. 


756 


BANKRUPTCY. 


Bk.  IV. 

Chap.  4. 
Sect.  3. 


Ex  parte 
Cooper ; 


[  *  688] 


nor  in  that 
of  surviving 
partner. 


be,  and  often  is,  perfectly  justifiable;  and  if  one  part- 
ner only  is  in  possession  of  partnership  goods,  and  the 
circumstances  are  not  such  as  to  show  that  he  is  in  ex- 
clusive possession  for  purposes  unconnected  with  the 
partnership,  those  goods  will  not  be  treated  as  in  his 
order  and  disposition  (g).  In  conformity  with  this 
principle,  if  a  firm  is  dissolved  and  all  its  property  is 
vested  in  one  partner  upon  trust  to  pay  the  debts  of  the 
firm,  and  he  becomes  bankrupt,  the  property  of  the 
firm  is  not  distributable  as  his  separate  estate,  but  re- 
tains its  character  of  joint  estate  \h).  It  is  not  even 
necessary  that  there  should  be  any  actual  assignment 
to  him  upon  an  express  trust;  for  if  a  firm  is  simply 
dissolved  and  one  partner  continues  in  possession  of  its 
property,  he  is  held  to  be  in  such  possession  on  behalf 
of  the  firm,  and  for  the  purpose  of  winding  up  its 
affairs,  until  the  contrary  is  proved  (i). 

Thus,  in  the  case  of  Ex  parte  Cooper  (k),  A.  and  B. 
dissolved  partnership;  a  notice  of  the  dissolution  was 
inserted  in  the  Gazette,  and  such  notice  stated  that  A. 
would  receive  and  pay  all  debts.  A.  continued  to  carry 
on  the  partnership  *  business  in  the  name  of  the  old 
firm,  and  he  bad  its  property  in  his  possession.  On 
the  subsequent  bankruptcy  of  A.  and  B.,  four  months 
after  the  dissolution,  it  was  held  that  the  property  of 
the  firm  in  A.'s  possession  was  not  to  be  considered  as 
in  his  order  and  disposition. 

"Where  partnership  property  comes  into  the  hands  of 
one  partner  by  survivorship,  and  that  partner  becomes 
bankrupt,  very  strong  circumstances  are  required  to 
show  that  such  property  is  distributable  as  his  separate, 
and  not  as  joint  estate  (I).     If  he  continues  to  carry 

(g)  Ex  parte  Flyn,  1  Atk.  185;  Ex  parte  Taylor,  Mont.  240, 
item  2nd.  Compare  Ex  parte  Brown.  9  Ch.  D.  389,  where  part- 
nership goods  were  mortgaged  by  two  partners,  and  one  retired, 
and  the  mortgagee  allowed  the  goods  to  remain  with  the  continu- 
ing partner. 

(h)  Copeman  v.  Gallant.  1  P.  W.  :;14;  and  see  Ex  parte  Martin, 
19  Ves.  491;  Ex  parte  Fell,  10  ib.  348;  Ex  parte  Pembertou,  1 
Deac.  421. 

(i)  Ex  parte  Williams,  11  Ves.  3;  Ex  parte  Taylor.  Mont.  240; 
Ex  parte  Copeland,  2  Mont.  &  A.  177.  See,  too,  Ex  parte  Vardon, 
2  M.  D.  &  D.  694. 

(k)  1  M.  D.  &  D.  35-'.  Compare  Graham  ».  McCulloch,  20  Eq. 
397,  noticed  infra,  p.  689,  whore  the  bankrupt  was  in  possession 
as  purchaser. 

(/)  See  Ex  parte  Manchester  Bank,  12  Ch.  D.  !U7.  and  13  ib. 
465.  sub  nom.  Ex  parte  Butcher;  Brett  v.  Beckwith,  3  Jur.  X.  S. 
31,  noticed  ante,  p.  600;  Ex  parte  Leaf,  Mon.  &  Ch.  662;  Ex  parte 
Heath,  4  Jur.  28.  Compare  Ex  parte  Taylor,  Mont.  240.  noticed 
infra,  p.  689. 


REPUTED  OWNERSHIP.  757 

on  the  business,  contrary  to  the  trust  reposed  in  him,  Bk.  IV. 
and  against  the  consent  of  the  persons  interested  in  the  !?|fp"Q4" 
estate  of  the  deceased  partners,  it  is  clear  that  the  re-    ec  '  °' 
puted  ownership  clause  will  not  apply  (m). 

Where,  however,  a  partnership  is  dissolved,  and  one  Difference 
of  the  partners  continues  to  carry  on  the  business  on  ^nere  eoQ- 
his  own  account,  and  not  for  the  purpose  of  winding  up  nern«a^Z^ 
the  affairs  of  the  concern,  and  where,  from  lapse  of  0n  business 
time  or  otherwise,  there  is  evidence   to   show   accjuies-  for  himself 
cence  in  such  a  course  of  proceeding  on  the  part  of  the  onb'- 
retired  partners,  then  the   nature  of   the    partnership 
property  will  be  held  to  have  been  changed,  either  by 
virtue  of  a  tacit  agreement  between  the  partners  them- 
selves, or  by  virtue  of  the  doctrine  of  reputed  owner- 
ship; and  in  either  case,  that  which   was  the  joint  es- 
tate of  all  will  be  distributable  as  the  separate  estate 
of    the   continuing   partner    (n).     Thus,    in    Horn    v.  Horn  v. 
Baker  (o),  A.,  B.,  and  C.  dissolved  partnership,  and  it  Baker, 
was  agreed  that  C.  and  a  third  person,  D.,  should  con- 
tinue the  business  on  their  own  account,  and  that  they 
should  pay  an  annuity  to  A.,  and  after  his  death  to  his 
widow.     The  partnership  property  was  not  assigned  to 
C.  and  D.,  but  was  allowed  to  remain  in  their  posses- 
sion for  the  purposes  of  their  business;  and  on  their 
bankruptcy,  such  of  the  property  as  consisted  of  *goods  [  *  689] 
and  chattels  was  held  to  be  in  their  order  and  disposi- 
tion, with  the  consent  of  their  true  owner. 

Again,  in  Graham  v.  McCulloch  (p),  the  plaintiff  and  Graham  r. 
the  defendant  were  partners,  and  in  a  suit  for  dissolu-  McCulloch. 
tion,  and  under  an  order  of  the  Court,  the  plaintiff 
agreed  to  buy  the  business,  and  was  let  into  possession 
as  purchaser.  Before  the  money  was  paid  he  became 
bankrupt,  and  it  was  held  that  the  business  assets  be- 
longed to  his  trustee  as  part  of  his  estate,  and  that  the 
partnership  could  only  prove  for  the  purchase-money. 
The  property  purchased  had,  in  fact,  passed  in  equity 
to  the  bankrupt,  who  was  a  mere  debtor  for  the  price. 
The  property  was  not    in   the  order  and  disposition  of 

(in)  Ex  parte  Butcher.  13  Ch.  D.  465:  Stocken  v.  Dawson,  9 
Beav.  239,  and  on  appeal,  17  L.  J.  Ch.  282. 

(»')  See  West  v.  Skip,  1  Ves.  S.  242;  Ex  parte  Barrow.  2  Rose, 
252;  Ex  parte  Fell,  10  Ves.  347.  See,  also,  Ex  parte  Havinan,  8 
Ch.  D.  11. 

(o)  9  East,  215. 

(p)  20  Eq.  ?>[)".  The  doctrine  of  reputed  ownership  seems 
hardly  applicable  to  such  a  case.  The  property  was  in  equity 
the  bankrupt's  ;  he  was  in  possession,  and  was  debtor  for  the 
purchase-money.  So  in  Ex  parte  Assignees  of  Brewster  and  West, 
22  L.  J.  Bank.  62,  there  cited. 


75S 


•BANKRUPTCY. 


Bk.  IV. 
Chap.  4. 
Sect.  3. 


Case  of 
surviving 
partner. 
Ex  parte 
Taylor. 


2.  Effect  of 

reputed 

ownership  on 

dormant 

partners. 

Col  dwell  v. 

Gregory. 


[  *  690] 


Keynolds  v. 
Bowlev. 


the  firm,  but  in  his  own  order  and  disposition  with  the 
consent  of  his  co-partner. 

Where  the  continuing  partner  is  a  surviving  partner, 
the  doctrines  of  reputed  ownership  may  apply,  although, 
as  before  observed,  under  ordinary  circumstances  they 
do  not.  In  Ex  parte  Taylor  (q),  a  debt  due  to  a  firm 
had,  on  the  death  of  one  of  the  partners,  been  com- 
promised by  the  survivors,  who,  in  lieu  of  payment, 
had  accepted  from  the  debtor  two  promissory  notes,  and 
a  policy  of  insurance,  which,  on  their  bankruptcy,  were 
in  their  possession.  The  Vice-Chancellor  (Shadwell) 
held,  that  the  debt,  having  been  compromised  by  the 
surviving  partners,  was  within  the  statute. 

Secondly,  ivhere  there  is  a  dormant  partner.  —The  ex- 
tent to  which  a  dormant  partner  is  affected  by  the 
doctrine  of  reputed  ownership  is  by  no  means  well 
settled.  It  was  held  in  Goldwell  v.  Gregory  (r),  that 
if  there  was  a  partnership  of  two  persons,  one  of  whom 
was  dormant,  and  the  other  of  whom  became  bankrupt, 
the  share  of  the  former  did  not  pass  to  the  assignees  of 
the  latter ;  it  being  monstrous  to  deprive  the  dormant  part- 
ner of  his  share  in  the  partnership  property,  and  yet  leave 
him  liable  to  all  the  partnership  creditors.  This  case, 
however,  *  was  generally  considered  as  overruled  by 
later  authorities  which  were  taken  as  having  settled 
that,  under  the  circumstances  supposed,  the  whole  part- 
nership property  was  in  the  order  and  disposition  of 
the  bankrupt,  within  the  meaning  of  the  reputed  owner- 
ship clause,  and  was,  therefore,  distributable  as  if  it 
belonged  to  him  alone  (s).  It  naturally  followed  from 
this,  that  if  a  dormant  partner  retired,  and  the  other 
partners  continued  to  carry  on  the  business  of  the  firm, 
and  became  bankrupt,  the  partnership  property  was  in 
their  order  and  disposition,  although  it  was  agreed 
that  they  should  apply  it  in  payment  of  the  debts  of 
the  old  firm  (t). 

However,  in  Reynolds  v.  Bowley  (w)  the  Court  of 
Exchequer  Chamber  held  that  where  two  partners  car- 
ried on  business  in  the  name  of  one  of  them,  the  goods 
of  the  firm  could  not  be  treated,  on  the  bankruptcy  of 

(q)  Mont.  240,  item  No.  1. 

(r)  1  Price,  119,  130,  and  2  Rose,  149. 

(s)  Ex  parte  Dyster,  2  hose,  256  ;  Ex  parte  Enderby,  2  B.  &C. 
389  Exparte  Chuck,  Mont.  364,  and  8  Bing.  4(59  ;  Re  Curry,  12 
Ir.  Eq.  382. 

(t)  Exparte  Enderby,  2  B.  &  C.  389  ;  Ex  parte  Chunk,  8  Bing. 
469  ;    Ex  parte  Jennings,  Mont.  45. 

(it)  L.  R.  2  Q.  B.  474,  reversing  ib.  41.  See  ante,  p.  685, 
notes  (y)  and  (z). 


REPUTED  OWNERSHIP.  759 

that  one,  as  in  his  order  and  disposition  with  the  con-  Bk.  IV. 
sent  of  the  other  partner.      This  decision,  if  based  upon  Chap.  4. 
the  ground  that  the  so-called   dormant  partner  was  in    ec 
joint  possession  with  the  bankrupt,  offers  no  real  diffi- 
culty ;   and  the  decision  was  based  on  this  ground  both 
by  Willes,  J.,  and  Bramwell,  B.     But  the  majority  of 
the    Court    (x)   based    their    judgment   on    the   much 
broader  ground  that  the  reputed  ownership  clause  only 
applies  where  there  is  a  true  owner,  and  another  person 
in  possession  with  his  consent  ;  and  that  the  clause  has 
no  application  to  cases  where  the  person  in  possession 
is  himself  a  joint  owner,  and  is  in  possession  by  virtue 
of  his  ownership,  and  has  as  much  right  to  possession 
as  his  co-owner. 

In    Ex  parte  Hay  man  (y),  however,  property  of    a  Ex  parte 
father  was  held  to  be  in  the  reputed  ownership  of  him-  Hayinan. 
self  and  his  son  who  was  not  a  partner,  but  was  liable 
to  some  creditors  as  if  he  were  a  partner.      The  father, 
who  was  the  true  owner,  had  *  allowed  his  property  to  [  *  691] 
be  in  the  reputed  ownership  of  himself  and  son.      The 
possession  in  this  case  was  not  in  accordance  with  the 
title,  whilst   in   Reynolds  v.  Bowley   it   was,    and  this 
seems  to  be  the  test  in  cases  of  this  description. 

In  Ex  parte  Wood  (z),  A.  and  B.  were  partners,  car-  Ex  parte 
rying  on  business  in  the  name  of  A.  They  dissolved  Wo' 
partnership,  and  it  was  agreed  that  A.  should  receive 
and  pay  all  debts,  and  should  retain  the  stock-in-trade, 
and  pay  B.  for  his  interest.  A.  continued  to  carry  on 
business  on  his  own  account,  and  became  bankrupt,  and 
afterwards  B.  became  bankrupt.  It  was  held  that  all 
the  partnership  debts  and  stock-in-trade  were  in  A.'s 
order  and  disposition,  as  reputed  owner  at  the  time  of 
his  bankruptcy,  and  were  consequently  distributable  as 
his  separate  estate,  although  the  dissolution  of  partner- 
ship had  not  been  publicly  made  known. 

Where,    however,   a    dormant   partner  is  dead,    that  In  the  event 
which  the  ostensible  partner  is  entitled   to  receive   or  of  death  of 
have  in  his  possession  as  survivor,  cannot  be  said  to  be  dorniant 
in  his  order  and  disposition  with  the  consent  of  the        Der" 
true  owner  (a),   unless  perhaps  the  executors  of  the 
deceased  allow  him  to  continue  to  carry  on  business 
with  their  testator's  assets. 

(ar)  Kelly,  C.  B.,  and  Byles,  Keating  and  Smith,  JJ.  See  the 
next  ease  in  which  their  reasoning  was  not  altogether  approved. 

(y)  ft  Ch.  D.  11.  See,  also,  Ee  Rowland  and  Crankshaw,  1  Ch. 
421  ;  Ex  parte.  Sheen,  (5  Ch.  I).  235. 

[z]  De  Gex,  134. 

(a)  See  Brett  v.  Beckwith,  3  Jur.  N.  S.  31,  and  other  cases 
cited  ante,  p.  688,  note  (/). 


760  BANKRUPTCY. 

Section  IV. — The  Administration  of  Bankrupt  Part- 
ners' Estates. 

1.    General  principles. 

Bk.  IV.  The  principles  according  to  which  the  property  of 

Chap.  4.  bankrupt  partners  is  distributed  amongst  the  various 

LJ persons  having  claims  upon  it,  have  next  to  be  con- 

Administra-    sidered.      These  principles  are  the  same,  whether  the 

tion  ot  estate  to  be  administered  is  that  of  a  single  bankrupt 

rS*aAqo"i        partner,  or  that  of    a  bankrupt  firm  (b).      *    Conse- 

bankrurjt        quently,  the  present  subject  may  be  conveniently  dis- 

partners.         posed  of  by  examining  the  principles  which  apply  to  a 

joint  adjudication  against  the  firm,  and  by   noticing,  as 

may  be  required,  such    peculiarities  as   are   met  with 

when  the  bankruptcy  is  confined  to  one  partner  only. 

Joint  estate         In  administei'ing  the  estate  of  a  bankrupt  firm  or    of 

to  be  distin-    some  or  one  only  of  its  members,  it  is  necessary  to  dis- 

guished  tinguish  accurately,  first,  joint  from  separate  estate  ; 

estate^nd     and'  secondly,  joint  from  separate  debts  :  for  the  lead- 

joiut  debts      ing  principle  of  administration  is,  if  possible   to   pay 

from  separate  the  debts  of  the  firm  (joint  debts)  out  of  the  assets  of 

debts.  the  firm  (joint  estate),  and  the  private  debts  of  each 

partner  (separate  debts)  out  of  his  own  private  property 

(separate  estate):  in  other  words,  to  make  each  estate 

pay  its  own  creditors  (c). 

Ex  parte  This  rule,  which  has  long  been  established,  was  clearly 

Cook.  laid  down  by  Lord  King  in  Ex  parte  Cook    (d),  in  the 

following  words:  "It  is  settled,  and  is  a  resolution   of 

convenience,  that  the  joint  creditors  shall  be  first  paid 

out  of  the  partnership  or  joint  estate,  and  the  separate 

creditors  out  of  the  separate  estate  of  each  partner  ; 

and  if  there  be  a  surplus  of  the  joint  estate,  besides  what 

will  pay  the  joint  creditors  ;  the  same  shall  be  applied 

to  pay  the  separate  creditors  ;  and  if  there  be,  on  the 

other  hand,  a  surplus  of    the  separate  estate  beyond 

what  will  satisfy  the  separate  creditors,  it  shall  go  to 

supply  any  deficiency  that  may  remain  as  to   the  joint 

creditors"  (e). 

(J)  The  same  principles  apply  where  a  husband  and  his  wife 
carry  on  one  business  in  partnership  (she  having  separate  estate), 
and  he  carries  on  another  business  alone,  Re  Childs,  9  Ch.  508. 

(c)  Ex  parte  Elton,  3Ves.  239,  and  see  1  .Mont.  Part.  110,  note 
2  D.,  Bank.  Rules,  1886,  r.  293. 

((/)  2  P.  W.  500.  See,  too,  Twiss  v.  Massey,  1  Atk.  67  ;  Ex 
parte  Crowder,  2  Vera,  706. 

(e)  The  principle  enunciated  above  was  departed  from  by  Lord 
Thurlow,  who  allowed  joint  and  separate  creditors  to  be  paid 
pari  passu.  Lord  Rosslyn  restored  the  old  rule,  but  allowed  the 
joint  creditors  to  be  paid  pari  passu  with  the  separate  creditors 


ADMINISTRATION  OF  ESTATES.  761 


The  rule  thus  laid  down  by  Lord  King  still  prevails.  Bk.  IY. 
*  The  Bankruptcy  Act,  3883,  enacts  as  follows  :—      gg£p"44" 

\  10.  (3.)  In  the  case  of  partners  the  joint  estate  shall  be  ap-  r  #  pqqi_ 
plicable  in  the  first  instance  in  payment  of  their  joint  debts,  and  L 
the  separate  estate  of  each  partner  shall  be  applicable  in  the  first 
instance  in  payment  of  his  separate  debts.  If  there  is  a  surplus 
of  the  separate  estatesit  shall  be  dealt  with  as  apart  of  the  joint 
estate.  If  there  is  a  surplus  of  the  joint  estate  it  shall  be  dealt 
with  as  part  of  the  respective  separate  estates  in  proportion  to 
the  right  and  interest  of  each  partner  in  the  joint  estate. 

I  59.   (1.)  Where  one  partner  of  a  firm  is  adjudged  bankrupt,  Joint  and 
a  creditor  to  whom  the  bankrupt  is  indebted  jointly  with  the  separate 
other  partners  of  the  firm,  or  any  of  them,  shall  not  receive  any 
dividend  out  of  the  separate  property  of  the  bankrupt  until  all 
the  separate  creditors  have  received  the  full  amount  of  their  re- 
spective debts. 

(2.)  Where  joint  and  separate  properties  are  being  adminis- 
tered, dividends  of  the  joint  and  separate  properties  shall,  sub- 
ject to  any  order  to  the  contrary  that  may  be  made  by  the  Court 
on  the  application  of  any  person  interested,  be  declared  together; 
and  the  expenses  of  and  incident  to  such  dividends  shall  be  fairly 
apportioned  by  the  trustee  between  the  joint  and  separate  prop- 
erties, regard  being  had  to  the  work  done  for  and  the  benefit  re- 
ceived by  each  property. 

And  the  Bankruptcy  rules,  1886  (like  the  older  rules) 
require  distinct  accounts  to  be  kept  of  the  joint  and 
separate  estates  (/  ).      The  rule  is  as  follows  : 

293.  Where  a  receiving  order  has  been  made  against  debtors  in  Joint  and 

partnership,  distinct  accounts  shall  be  kept  of  the  joint  estate  separate 

and  of  the  separate  estate  or  estates,  and  no  transfer  of  a  surplus  estaTes 

accounts, 
from  a  separate  estate  to  the  joint  estate  on  the  ground  that  there 

are  no  creditors  under  such  separate  estate  shall  be  made  until 

notice  of  the  intention  to  make  such  transfer  has  been  gazetted. 

Further  the  Bankruptcy  rules,  1886,  provide  : — 
269.  If  any  two  or  more  of  the  members  of  a  partnership  con- 
out  of  the  separate  estate  in  case  of  there  being  no  joint  estate. 
The  rule  thus  modified  by  Lord  Rossi  yn  was  adhered  to  by  Lord 
Eldon,  and  has  not  since  been  departed  from.  See  Ex  parte  Taitt, 
16  Yes.  193:  1  Mont.  Part.  110,  note  2D.,  and  67,  note  Q.; 
Cooke's  Bank.  Law.  250  cf  *cq.,  ed.  8.  See,  for  some  reasons 
justifying  the  rule.  Lodge  v.  Prichard.  1  De  G.  J.  &  S.  613,  614, 
per  Turner,  L.  J.  The  rule  is  adhered  to  without  reference  to 
the  actual  advantage  or  disadvantage  to  the  creditors  in  any  par- 
ticular case.  See  Nansou  v.  Gordon,  1  App.  Ca.  195  ;  Ex  parte 
Collinge,  4  De  G.  J.  A  Sin.  533. 

(/)  Bank.  Rules.  1886,  r.  203.  A  petition  that  separate  ac- 
counts may  be  kept  is  improper  where  the  general  order  applies; 
Ex  parte  Green   1  D.  &  C.  382. 


762 


BANKRUPTCY. 


Bk.  IV. 
Chap.  4. 

Sect.  4. 


Separate 

linns. 


[*694] 


Apportion- 
ment of 
costs  between 
joint  and 
separate 
estates. 
Costs  out  of 
joint  or 
separate 
estates. 


Apportion- 
ment of 
trustee's 
remunera- 
tion. 


stitute  a  separate  and  independent  firm,  the  creditors  of  such  last 
mentioned  firm  shall  be  deemed  to  be  a  separate  set  of  creditors, 
and  to  be  on  the  same  footing  as  the  separate  creditors  of  any  in- 
dividual member  ot  the  firm.  And  where  any  surplus  shall 
arise  upon  the  administration  of  the  assets  of  such  separate  or  in- 
dependent firm,  the  same  shall  be  carried  over  to  the  separate 
estates  of  the  partners  in  such  separate  and  independent  firm  ac- 
cording to  their  respective  rights  therein. 

*  And  as  regards  costs  and  remuneration  of  the  trus- 
tee they  also  provide  : — 

127.  In  the  case  of  a  bankruptcy  petition  against  a  partner- 
ship, the  costs  payable  out  of  the  estates  incurred  up  to  and  in- 
clusive of  the  receiving  order  shall  be  apportioned  between  the 
joint  and  separate  estates  in  such  proportions  as  the  Official  Re- 
ceiver may  in  his  discretion  determine. 

128.  (1.)  Where  the  joint  estate  of  any  co-debtors  is  insufficient 
to  defray  any  costs  or  charges  properly  incurred  prior  to  the  ap- 
pointment of  the  trustee,  the  Official  Receiver  may  pay  or  direct 
the  trustee  to  pay  such  costs  or  charges  out  of  the -separate  estates 
of  such  co-debtors,  or  one  or  more  of  them,  in  such  proportions  as 
in  his  discretion  the  Official  Receiver  may  think  fit.  The  Offi- 
cial Receiver  may  also,  as  in  his  discretion  he  may  think  fit,  pay 
or  direct  the  trustee  to  pay  any  costs  or  charges  properly  incurred, 
prior  to  the  appointment  of  the  trustee,  for  any  separate  estate 
out  of  the  joint  estate  or  out  of  any  other  separate  estate,  and 
any  part  of  the  costs  or  charges  of  the  joint  estate  incurred  prior 
to  the  appointment  of  the  trustee  which  affects  any  separate  es- 
tate out  of  that  separate  estate. 

(2.)  Where  the  joint  estate  of  any  co-debtors  is  insufficient  to 
defray  any  costs  or  charges  properly  incurred  after  the  appoint- 
ment of  the  trustee,  the  trustee,  with  such  consent  as  is  herein- 
after mentioned,  may  pay  such  costs  or  charges  out  of  the  sepa- 
rate estates  of  such  co-debtors,  or  one  or  more  of  them.  The  trus- 
tee, with  the  said  consent,  may  also  pay  any  costs  or  charges 
properly  incurred  for  any  separate  estate,  after  his  appointment, 
out  of  the  joint  estate,  and  any  part  of  the  costs  or  charges  of  the 
joint  estate  incurred  after  his  appointment  which  affects  any 
separate  estate  out  of  that  separate  estate.  No  payment  under 
this  rule  shall  be  made  out  of  a  separate  estate  or  joint  estate  by 
a  trustee  without  the  consent  of  the  committee  of  inspection,  ot 
the  estate  out  of  which  the  payment  is  intended  to  be  made,  or, 
if  such  committee  withhold  or  refuse  their  consent,  without  an 
order  of  the  Court. 

270.  Where  joint  and  separate  estates  are  being  administered, 
the  remuneration  of  the  trustee  in  respectof  the  administration  of 
the  joint  estate  may  be  fixed  by  the  creditors,  or  (if  duly  author- 
ised) by  the  committee  of  inspection  of  such  joint  estate,  and  the 


ADMINISTRATION  OF  ESTATES.  763 

remuneration  of  the  trustee  in  respect  of  the  administration  of  any  Bk.  IV. 
separate  estate  may  be  fixed  by  the  creditors,  or  (if  duly  author-  Chap.  4. 
ised)  by  the  committee  of  inspection  of  such  separate  estate.  ' 


"Where,  under   a  separate  adjudication,  the  trustee  Keeping 
possesses  himself  of  the   assets  of  the  firm,   he  must  distinct 
keep  similar  distinct  accounts,  so  as  not  to  pay  the  sepa-  accounts- 
rate  creditors  of  the  bankrupt  out  of  the  assets  of  the 
firm,  nor  the  creditors  of  the  firm  out  of  the  separate 
property  of  the  bankrupt  (g). 

*  If  a  creditor  proves  his  demand  against  the  -wrong  [  *  695] 
estate  he  will,  on  discovering  his  mistake,  be  allowed  to  Correcting 
transfer  his  proof  to  the  other  estate  (h).  mistakes, 

"Where   one  estate  has  paid  debts  or  expenses  which  c 
ought  to  have  been  borne  by  the  other,  the  amount  so 
paid  will  be  ordered  to  be  refunded  by  the  latter  to  the 
former  estate  (i). 

If  the  joint  and  separate  creditors  both  agree  that  the  Consolida- 
joint  and  separate  estates  shall  be  consolidated  and  ad-  tion  of 
ministered  as  one  fund,  there  is  no  reason  why  such  estates, 
consolidation  should  not  take  place.      And  where  the 
two  estates  are  so  blended  that  they  cannot  be  kept 
separate,  they  must    be  consolidated,  whether  all  the 
creditors  desire  it  or  not ;  but  if  it  is  practicable  to 
keep  them  separate,  they  will  not  be  consolidated,  ex- 
cept by  consent  (A;).     If  a  majority  of  a  meeting  of 
both  classes  of  creditors  are  in  favour  of  a  consolida- 
tion, it  will,  nevertheless,  not  be  made  until  after  it  has 
been  ascertained  by  the  Court  to  be  for  the  general  ben- 
efit (I).     It  is,  however,  to  be  observed  that  a  consoli- 

(g)  See  Ex  parte  Voguel,  1  Atk.  132,  as  to  the  old  practice. 
See,  too,  Cooke's  Bank.  Law,  267,  ed.  8,  and  the  casespf  Ex  parte 
Tate.  Ex  pari 'c  Hay  ward,  Ex  parte  Burnaby  there  cited.  See,  too, 
Watson  on  Part.  324,  and  1  Mont.  Part,  note  2  D.  p.  110,  in  nott  :s; 
Dutton  v.  Morrison,  17  Ves.  209;  Be  Wait,  1  J.  &  W.  610. 
Again,  when  persons  are  connected  in  various  partnerships,  and  a 
joint  adjudication  is  obtained  against  them  all,  an  order  may  be 
obtained  for  keeping  separate  accounts  of  the  different  firms,  as 
well  as  the  separate  estates  of  each  partner  ;  Ex  parte  Marlin,  2 
Bro.  C.  C.  15.  But  if  there  are  several  connected  firms,  one  of 
which  alone  is  made  bankrupt,  there  can  only  be  the  common 
order  for'keeping  separate  accounts  of  the  joint  and  separate  es- 
tates of  the  partners  composing  it :  Ex  parte  Parker,  Cooke's 
Bank.  Law, -27-2.  ed.  8. 

(h)  Ex  parte  Yining,  1  Deac.  555. 

(i)  Ex  parte  Rutherford,  1  Rose,  201  ;  Exparte  Reid,  2  ib.  84  ; 
and  see  Rogers  v.  Mackenzie,  4  Ves.  752,  as  to  contribution  be- 
tween estates. 

(k)  Ex  parte  Sheppard,  Mon.  &  Bl.  415. 

(I)  See  Ex  parte  Strutt,  1  Gl.  &  J.  29  ;  Ex  parte  Part,  2  Deac. 
&  C.  1.  where  an  inquiry  was  directed.  In  Ex  parti  Smith,  2 
M.  &  A.  60,  it  was  held  unnecessary  to  serve  the  assignees  before 


764 


BANKRUPTCY. 


Bk.  IV. 
Chap.  4.  Sect. 
4. 


Comparison 
of  the  modes 
[  *  696] 
in  which 
lawyers  and 
accountants 
proceed  in 
cases  of 
bankruptcy. 


dation  of  estates  does  not  affect  debts  proved  before 
the  consolidation  takes  place  ;  and  if  a  debt  has  been 
properly  proved  against  each  of  several  estates,  the 
creditor  will  not  be  prejudiced  by  their  subsequent  con- 
solidation (m). 

The  principle  adopted  in  bankruptcy  of  making  each 
estate  pay  its  own  creditors,  often  produces  results 
strangely  at  *  variance  with  the  doctrine  of  equality, 
and  with  an  accountant's  notions  of  right  and  wrong. 
This  cannot  be  better  shown  than  by  the  following  ex- 
tract from  a  work  already  referred  to  on  the  subject  of 
partnership  accounts  : 

••  We  will  suppose  A.,  a  man  worth  40,000?.  clear,  well  known 
in  London,  and  of  extensive  credit,  to  embark  with  an  inventor, 
B.,  to  carry  into  effect  some  invention  which  requires  apparently 
more  credit  than  actual  capital  ;  there  being  what  may  fairly  be 
considered  a  most  excellent  prospect  of  success,  and  of  turning 
the  concern,  as  the  phrase  is,  within  a  short  space  of  time,  i.e., 
receiving  from  the  anticipated  profits  of  the  concern,  within  the 
number  of  months  in  which  the  bills  given  by  this  partnership 
become  due,  sufficient  money  to  meet  them  or  take  them  up. 
Some  accident  intervenes,  by  which  it  becomes  necessary  for  A., 
who  undertakes  to  find  money,  to  raise  a  sum  to  meet  the  numer- 
ous bills  which  the  firm  has  ventured  to  put  afloat,  in  expecta- 
tion of  their  being  taken  up  by  the  success  of  the  project.  A. 
raises  upon  his  credit  from  several  persons,  perhaps  at  a  distance 
in  the  country  and  altogether  ignorant  of  his  trading,  what  he 
himself  considers  only  temporary  loans,  to  the  amount  of  39,- 
000?.,  and  brings  this  money  into  the  firm,  not  as  a  loan  but  as 
capital.  We  will  further  suppose  that  this  is  insufficient,  and 
that  the  firm,  after  a  few  more  struggles,  stops  payment  for  50,- 
000?.  owing  to  different  individuals.  A  general  meeting  of  all 
the  creditors  is  called,  at  which  there  is  a  desire  to  settle  the 
matter,  and  realise  the  effects  as  fast  as  possible,  and  for  that  pur- 
pose they  put  the  matter  into  the  hands  of  an  accountant.  If 
the  accountant  knew  anything  of  the  law  of  bankruptcy,  he 
would  see  the  difficulties  ;  but  if  he  simply  followed  out  the  mer- 
cantile principles,  he  would  first  take  the  accounts  of  the  firm, 
and  there  find  50,000?.  debt,  and  we  will  say  4000?.  assets  ;  and 
consequently  a  balance  due  to  the  firm  from  A.  and  B.  to  the 
amount  of  46,000?.;  of  which  A.  would  be  indebted  23,000?.  and 
B.  23.000?.,  or  in  some  other  proportions  as  the  case  may  be  ;  but 
as  B.  is  worth  nothing  at  all,  A.  would  be  answerable  for  the 
whole.     The  accountant  would  then  take  A.'s  accounts  where  he 

making   a  consolidating  order  :  the  consolidation   having  been 
found  to  be  beneficial. 

(m)  Ex  parte  Fuller,  1  M.  &  A.  222. 


JOIXT  AND  SEPARATE  ESTATES.  765 

finds  A.'s  estate  worth  40,000?.,  and  that  he  is  liable  to  the  firm  Bk.  IV. 
for  46,0007.,  and  to  other  people  for  39,000/.,  making  the  whole  |^*P- 4- 
amount  of  his  liabilities  85,000?.,  upon  which  he  would  declare  _ 


a  dividend  of  9s.  4V7.     He  would,  therefore,  carry  over  to  the  Comparison 
firm,  as  a  creditor  for  46,000?.,  the  sum  of  21,647/.  Is.  3d.,  and  to  of  the  modes 
the  private  creditors  18,352/.  18*.  9d.,  which  distributed  among  ]^^v"rs  and 
the  39,000/..  would  give  them  a  dividend  of  9s.  4]d.     He  would  accountants 
then  proceed  to  distribute  the  effects  of  the  firm,  amounting  to  proceed  in 
21.647/..  Is.  3d.,  recovered  from  A.,  and  the  assets  in  hand,  viz.,  cases  of 
4000/.,  and    this,  being  altogether  25,6477.  Is.  3d.,  distributed  bankruptcy. 
among  50,000/..  would  give  a  dividend  of  10*.  3d.     Such  would 
be  the  result  of  the  accountant's  operation.     But  some  of  the  sep- 
arate creditors  would   probably  be  dissatisfied   with  this  result. 
and  strike  a  docket,  and  have  the  accounts  taken  in  bankruptcy. 
The  Court  of  Bankruptcy  would  immediately  overthrow  the  ac- 
countant's  labour's,  and  take  the  accounts  upon  an  entirely  dif- 
ferent plan.     It  would  direct  that  the  separate  estate  should  be 
distributed  amongst  the  separate  creditors,  and  if  there  were  any 
surplus,  that  it  should  be  paid  over  to  the  *  joint  estate.     There-  [  *  697] 
fore,  as  40,000/.  would  be  distributed  among  39,000/..  they  would 
be  all  paid  in  full,  and    1000/.  passed   over  to  the  joint  estate, 
making  the  assets  of  the  joint  estate  5000/.,  which,  being  distrib- 
uted among  the  50,000/.,  would  be  exactly  2s.   in  the  pound. 
Thus  the  Court  of  Bankruptcy  would  give  the  separate  creditor 
20s.  in  the  pound,  and  the  joint  creditors  2s.  ;  while,  according 
to  the  mercantile  principle,  the  separate  creditors  ought  to  have 
had  but  9s.  4hd.,  and   the  joint  creditors  10s.  3d.     Such  is  the 
difference  between  the  practice  of  the  two  classes.     But  if  the 
firm  had  had  no  property  at  all,  or  the  partners,  in  a  fit  of  de- 
spair, had  pledged  all  the  assets  for  more  than  they  were  worth, 
the  Court  of  Bankruptcy  would  have  adopted  the   accountant's 
principle,  and  suffered  the  joint  creditors  to  go  in  for  their  divi- 
dends upon  the  separate  estate"  (»). 

2.   Of  joint  estates  and  separate  estates.1 

What  property  is  distributable  as  partnership  prop-  Joint  and 

ertv,  and  what  is  not,  depends  mainly  upon  two   ques-  separate 
, .   •"  estate, 

tions,  viz. : — 

1.  Whether,  as  between  the  partners  themselves,  the 
property  in  question  belonged  to  them  jointly,  or  to 
some  or  one  of  them  to  the  exclusion  of  the  others  ;  and 

2.  Whether  the  property  in  question,  no  matter  to 
whom  it  belonged,  was,  at  the  time  of  the  bankruptcy, 
in  the  reputed  ownership  of  the  firm,  or  in  that  of  some 
or  one  only  of  its  members. 

(w)  Cory  on  Merc.  Accounts,  p.   124  et  seq.,  ed.  2. 
1  See  page  599,  note  1. 


m 


BANKRUPTCY. 


Bk.  VI. 

Chap.  4. 
Sect.  4. 


Ex  parte 
Ruffin. 


[  *  698] 


Observations 
on  agree- 
ments con- 
verting 
joint  into 
separate 
estate,  and 
vice  versa. 


The  principles  applicable  to  these  questions  having 
been  already  fully  examined  (o),  it  is  only  necessary, 
in  the  present  place,  to  notice  those  peculiar  difficul- 
ties which  are  met  with  when  it  becomes  necessary  to 
distinguish  joint  from  separate  estate  for  the  purposes 
of  administration  in  bankruptcy. 

It  was  decided  in  the  celebrated  case  of  Ex  parte 
Ruffin  (p),  that  agreements  between  partners  altering 
the  character  of  partnership  property  are  binding  on 
the  trustee  in  bankruptcy,  if  made  bond  fide,  and  before 
the  commission  of  any  act  of  bankruptcy.  This  case 
has  been  followed  by  many  others,  and  it  is  therefore 
now  beyond  dispute  that  if  a  partnership  is  dissolved, 
and  a  bond  fide  agreement  is  come  to  between  the  part- 
ners, to  the  effect  that  what  was  the  partnership  prop- 
erty shall  become  the  property  of  him  who  continues  the 
business,  *  and  afterwards  the  firm  or  the  continuing 
partner  becomes  bankrupt,  that  which  was  the  partner- 
ship property  cannot  be  distributed  as  the  joint  estate 
of  the  firm,  "but  must  be  treated  as  the  separate  estate 
of  the  continuing  partner  (q).  The  creditors  of  the 
firm  have  no  lien  on  its  property  which  can  prevent  the 
partners  from  bond  fide  changing  its  character,  and  con- 
verting it  into  the  separate  estate  of  one  of  them  (?*). 

Even  if  the  liabilities  of  the  partnership  exceed  its 
assets  at  the  time  when  the  agreement  is  made,  still,  if 
the  partners  act  bond  fide,  and  not  with  a  view  to  de- 
fraud their  creditors,  the  ownership  in  that  which  before 
the  agreement  was  partnership  property  will  have 
changed,  and  the  joint  creditors  of  the  firm  cannot  in- 
sist  on  its  distribution  as  joint  estate  (s) 

In  order,  however,  that  property  of  the  firm  may 
have  lost  its  character  of  joint  estate  by  agreement 
between  its  partners,  the  agreement  must  not  be  tainted 
with  fraud,  nor  be  still  executory,  nor  leave  the  prop- 
erty subject  to  the  liens  of  the  partners   for  their    own 

(o)  Ante,  Bk.  III.  c.  4,  and  Bk.  IV.  c.  2,  \  3,  and  ante,  \  3. 

(p)  6  Ves.  119. 

(q)  Be  Simpson,  9  Ch.  572 .  Ex  parte  Walker,  4  De  G.  F.  &  J.  509; 
Ex  parte  Titner,  1  Atk.  136  ;  Ex  parte  Fell,  10  Ves.  347  ;  Ex  parte 
Williams,  11  ib.  6  ;  Ex  parte  Clarkson,  4  D.  &  Ch.  56  :  Ex  parte 
Gurnev,  2  M.  D.  &  D.  541  ;  Bolton  r.  Puller,  1  Bos.  &  P.  539. 

(r)  Ex  parte  Ruffin,  6  Ves.  119  ;  Ex  parte  Williams,  11  ib.  6  ; 
Stuart  v.  Ferguson,  Hayes  (Ir.  Ex.)  472.  Compare  the  cases 
cited  infra,  note  (it). 

(s)  Ex  parte  Walker,  4  De  G.  F.  &  J.  509 ;  Ex  parte  Peake,  1 
Madd.  346  ;  Ex  parte  Clarkson,  4  D.  &  C.  66,  per  Sir  G.  Rose, 
and  see  Ex  parte  Carpenter,  Mont,  &  MacAr.  1.  Compare  Re 
Kemptner,  8  Eq.  287,  where  the  state  of  tkenrmwas  held  to  dis- 
prove bond  fides. 


JOINT  AND  SEPARATE  ESTATES.  767 

indemnity.  If  there  be  fraud,  whether  as  between  the  Bk.  VI. 
partners  themselves  or  solely  as  against  creditors,  the  £lm.p\4- 
agreement  will  not  be  binding  on  the  trustee  in  bank- 


ruptcy (t);  and  where  both  partners  were  insolvent,  Fraud, 
an  assignment  by  one  of  them  of  his  share  to  the  other 
in  consideration  of  a  covenant  by  him  to  pay  the  part- 
nership debts  was  held  fraudulent  and  void  as  against 
the  joint  creditors  (u). 

Moreover,  if  the  agreement  to  transfer   or   assign  is  Executory 
still  executory,  the  character  of  the  property  will  not,  in  agreements, 
fact,  have  been  changed  at  the  time  of   the  bankruptcy, 
and  it  must,  therefore,  *  be  distributed  as  if  the  agree-  [  *  699] 
ment  had  not  been  entered  into   (x).      Whether    an 
agreement  is  executory  or  not,  must  depend  upon  its 
terms  ;  the  test,  however,  is  to   see  whether  there  was 
at  the  time  of  the  bankruptcy,  any  act  still  to  be  "done 
before  the  ownership  could  be  considered  by  the  part- 
ners as  changed  ;  if  in  any  case  there  was  such   an  act 
to  be  done,  the  trustee  will  not  be  bound  by  the  agree- 
ment, whilst    if  there  was  not  he  will.     In  Ex  parte  Ex  parte 
Wheeler  (y),  a  partner  retired  ;  the  continuing  partner  Wheeler, 
was  to  take  the  partnership  property,  and  to  pay  the 
retiring  partner  an  annuity,  and  the  father  of  the  con- 
tinuing partner  was  to  become  surety  for  payment  of 
this  annuity.     The  father,  however,  who  was  not  a  party 
to  the  agreement,  declined  to  become  surety,  and  on  the 
bankruptcy  of  the  continuing  partner  it  was   held  that 
the  agreement  was  not  an  executed  agreement,  and  that 
the  property  of  the  firm  had  not  therefore,  by  the  agree- 
ment, become  the  property  of  the  bankrupt.     On  the 
other  hand,  in  Ex  parte  Clarkson  (z),  where  a  partner  Ex  parte 
retired  upon  the  terms  of  receiving  a  certain  sum  of  clarkson- 
money,  partly  in  cash  and  partly  in  bills,  and  the  cash 
was  paid  and  the  bills  were  given,  it  was  held  that  the 
ownership  in  the  partnership  property    had    passed, 
although  the  bills  were  subsequently  dishonoured  (a). 

(0  See  Ex  parte  Rowlandson,  2  V.  &  B.  172,  and  1  Eose,  416 
and  Anderson  v.  Maltby,  2  Ves.  J.  244. 

(u)  Ex  parte  Mayou,  4  De  G.  J.  &  Sm.  664  ;  Re  Kemptner,  8 
Eq.  287.     Compare  the  cases  in  the  last  note  but  one. 

(x)  Ex  parte  Wheeler,  Buck.  25  ;  Ex  parte  Cooper,  1  M.  D.  & 
D.  358  ;  and  see  Ex  parte  Clarkson,  4  D.  &  Ch.  64,  67  ;  and  Re 
Kemptner,  8  Eq.  286. 

(y)  Buck.  25.     See,  also,  Ex  parte  Wood,  10  Ch.  D.  554. 

(z)  4  D.  &  Ch.  56  ;  S.  C,  nomine  Ex  parte  Gibson,  2  M.  &  Ayr. 
4.  See  Ex  parte  Wood,  10  Ch.  D.  554,  which  was  a  similar  case  ; 
but  as  no  cash  was  paid,  and  the  security  was  not  given,  the 
property  continued  joint. 

(a)  Compare  also  Ex  parte  Cooper.  1  M.  D.  &  D.  358,  and  Ex 
parte  Gurney,  2  ib.  541  ;  Re  Kemptner,  8  Eq.  286. 


768  BANKRUPTCY. 


ownership. 


Bk.  IV.  Again,  even  if  it  has  been  agreed  between  partners 

Chap.  4.  ^at  on  a  dissolution  the  continuing  or  surviving  part- 

ec  '    ' ner  shall  be  entitled  to  the  assets  of  the  firm,  still  so 

Property  long  as  these  assets  continue  subject  to  the  right  of  the 
must  not  be  0H_ier  partners  to  have  them  applied  in  discharge  of 
totheTliens  tae  J°*nt  debts,  tne  assets  will  continue  joint  for  the 
of  the  other  purpose  of  distribution  in  the  event  of  bankruptcy. 
partners.  To  convert  them  into  separate  estate  the  agreement  be- 
tween the  partners  must  be  inconsistent  with  the  con- 
tinuance of  this  lien  (6). 
[  *  700]  *  The  mere  fact  that  a  partnership  has  been  dissolv- 

Evidence  of    ed,  or  that  a  partner  has  retired,  will  not  be  sufficient 
such  agree-     evidence  of  an  agreement  for  the  conversion  of  the  joint 
estate  of  the  firm  into  the  separate  estate  of  the  con- 
tinuing partner.     It  may  be  that  the  property  has  been 
entrusted  to  him  simply  for  the  purpose  of  winding  up 
the  affairs  of  the  concern;  and  unless  there  be  some 
agreement  by  virtue  of  which  it  has  become  his  exclu- 
sively, it  will  in  case  of  bankruptcy  be  distributable  as 
joint  estate  (c). 
Effect  of  doc-      But,  as  before  observed,  whether  property  is  as  be- 
trine  of  tween  the   partners   themselves  the  joint  pioperty   of 

own^rshir.  them  all,  or  the  separate  property  of  some  of  them  only, 
the  nature  of  that  property  may  for  the  purposes  of  dis- 
tribution be  altogether  changed  by  reason  of  the  doc- 
trine of  reputed  ownership.  To  avoid  this  some  change 
in  the  possession  of  the  property  should,  if  necessary, 
be  made  consistently  with  the  agreement  between  the 
partners  (d).  Under  ordinary  circumstances  if  one 
partner  owns  all  the  property  used  for  partnership  pur- 
poses, and  his  co-partners  have  nothing  more  than  an 
interest  in  the  partnership  business,  still  that  property, 
if  personal,  will  on  the  bankruptcy  of  the  firm  be  dis- 
tributable as  the  joint  estate  of  all,  and  not  as  the  sep- 
arate estate  of  its  true  owner  (e). 

(b)  See  Ex  parte  Dear,  1  Ch.  D.  514;  Ex  parte  Morley,  8  Ch. 
1026;  Ex  parte  Manchester  Dank.  12  Ch.  D.  917,  and  13  ib.  465, 
sub  nom.  Ex  parte  Butcher,  where  the  joint  assets  were  not  con- 
verted. Compare  Re  Simpson,  9  Ch.  572,  where  they  were.  See, 
also,  the  cases  in  note  O),  infra. 

(c)  Ex  parte  Leaf,  4  Deac.  287;  Ex  parte  Cooper,  1  M.  D.  &  D. 
358;  Ex  parte  Williams,  11  Ves.  3.  The  agreement  need  not  be 
in  writing,  ibid.,  and  see  4  D.  &  Ch.  67,  per  Sir  G.  Rose. 

(d)  See,  as  to  the  goods  in  the  possession  of  third  parties,  Ex 
parte  Harris,  1  Madd.  583;  as  to  debts,  Ex  parte  Sprague,  4  De 
G.  M.  &  G.  866;  as  to  goods  in  the  possession  of  the  bankrupt 
himself,  Graham  v.  McCnlloch,  20  Eq.  397.  These  and  other 
cases  have  been  already  adverted  to.     See  \  3  of  this  chapter. 

(<?)  See  Ex  parte  Hay  man,  8  Ch.  D.  11;  Ex  parte  Hunter,  2 
Rose,  382;  Ex  parte  Owen,  4  De  G.  &  S.  351.  Compare  Ex  parte 
Murton,  1  M.  D.  &  D.  252. 


JOINT  AND  SEPARATE  DEBTS.  769 

Moreover,  if  A.  allows  B.  to  carry  on  business  with  Bk.  IV. 
his,  A.'s,  goods  and  on  his,  A.'s,  behalf,  although  not  in  |^j?'44, 
his  name,  but  credit  is  given  to  them  both  on  the  sup- 


position that  they  are  partners,  the  property  with  which  Effect  of 
the  business  is  carried  on  will  be  treated   as  the  joint  holding out- 
estate  of  the  two,  and  not  as  the  separate   estate  of 

*  Where  property  is  distributable  as  joint  estate,  the  [  *701J 
joint  creditors  take  it  as  the  promiscious  joint  prop- 
erty of  all  the  partners,  withput  reference  to  the  respec- 
tive interests  of  the  partnei-s  therein  (g). 

3.   Of  joint,  separate,  and  joint  and  separate  debts. 

For  the  purpose  of  administering  the  estates  of  bank-  Of  joint, 

rupt  partners,  their  creditors  must  be  divided  into  three  separate. 
■,  ■  and  joi,v* 

classes,  viz. :  an(j  separate 

1.  The  joint  creditora  of   the  firm  (h),  to   whom  all  deb**, 
the  partners  are  jointly  liable  (i). 

2.  The  separate  creditors  of  each  partner,  to  whom 
the  partners  are  only  liable  severally  and  respectively. 

3.  Joint  and  separate  creditors,  to  whom  the  partners 
are  not  only  liable  jointly,  but  also  separately  for  the 
same  debt  (k). 

"What  is  a  debt  of  the  firm  and  what  is  not,  must  be 
determined  by  the  principles  discussed  in  the  first  two 
chapters  of  the  second  book  (I).     Without  repeating 

(  f)  See  Re  Rowland  and  Crankshaw,  1  Ch.  421;  Ex  parteHaj- 
nian,  8  Ch.  D.  11. 

(g)  Ex  parte  Hunter,  2  Rose,  382. 

(h)  A  curious  misnomer.  Joint  creditors,  properly  speaking, 
are  persons  jointly  entitled,  and  not,  as  here,  persons  who  have 
nothing  to  do  with  each  other,  but  happen  to  have  the  same  joint 
debtors. 

(0  The  word  separate  is  relative.  Creditors  may  be  separate 
relatively  to  one  person,  and  joint  relatively  to  another,  e.  g., 
suppose  a  partnership  of  five  ;  creditors  of  any  four  are  separate 
relatively  to  the  creditors  of  the  live,  but  are  joint  relatively  to 
the  respective  creditors  of  each  of  the  four.  See  Bank.  Rules, 
1886,  r.  269,  ante,  p.  693. 

(k)  A  creditor  who  has  obtained  a  judgment  against  several 
persons  jointly,  can  levy  execution  against  any  one  or  more  of 
them  ;  and  therefore,  in  one  sense  judgment  debtors  may  be 
said  to  be  jointly  and  severally  liable.  This,  however,  does 
not  render  their  creditor  a  joint  and  separate  creditor.  He  is  a 
joint  creditor  ;  for  his  judgment  is  joint,  and  the  remedies  open 
to  him  do  not  alter  the  character  of  the  right  to  enforce  which 
they  are  given.  See  Ex  parte  Christie,  Mont.  &  Bli.  352.  N» 
distinction  is  made  between  persons  to  whom  all  the  partners  are 
jointly  indebted  in  connection  with  their  partnership  business, 
and  other  persons  to  whom  they  are  also  all  jointly  indebted. 
SeeHoaret'.  Oriental  Bank.  Corp.,  2  App.  Ca.  589. 

(/)  The  wife  of  a  partner  who  has  lent  money  to  the  firm,  is  a 

*  26    LAW   OF   PARTNERSHIP. 


770 


BANKRUPTCY. 


Bk.  IV. 
Chap.  4. 
Sect.  4. 


[  *  702] 
1.  What 
debts  are 
orignally 
joint  and 
what 
separate. 
Frauds  and 
breaches  of 
trust. 


Debts. 


Bills. 


[*703] 


those  principles  it  may  be  useful  to  recapitulate  shortly 
the  leading  rules  *  deducible  from  them,  and  bearing 
upon  the  proof  of  debts  in  bankruptcy. 

First,  as  to  the  original  nature  of  a  debt. — As  a  gen- 
eral rule,  that  which  is  the  debt  of  the  firm  is  not  the 
separate  debt  of  any  of  its  members  who  have  not 
made  themselves  severally  liable  for  it  (m);  but 

Breaches  of  trust,  and  frauds  imputable  to  a  firm, 
place  the  cestuis  que  trustent  and  defrauded  creditors 
in  the  position  of   joint  and  several  creditors  (n);   and 

A  debt  of  a  firm  of  two  partners,  of  whom  one  is  dor- 
mant, may,  at  the  option  of  the  creditor,  be  treated  as 
the  joint  debt  of  the  firm,  or  as  the  separate  debt  of  the 
ostensible  partner  (o) ;  and  a  debt  of  a  firm  of  two  part- 
ners, one  of  whom  is  merely  nominal,  may  likewise,  at 
the  option  of  the  creditor,  be  treated  as  the  joint  debt 
of  the  two,  or  as  the  separate  debt  of  him  who  is  in 
substance  the  whole  firm  (p). 

Bills  accepted  in  the  name  of  a  trading  firm  give  a 
right  of  proof  against  the  joint  estate  to  a  bona  fide 
holder  for  value  without  notice  of  the  fact  that  they 
have  been  accepted  or  endorsed  without  authority  (q); 
but  not  to  a  drawer  affected  with  such  notice  (r) ;  and 
if  a  separate  creditor  of  one  partner  takes  in  payment 
a  bill  of  the  firm,  he  must,  in  order  to  entitle  *  himself 
to  prove  against  its  joint  estate,  show  that  the  bill  was 
given  with  the  sanction  of  the  other  partners  (s). 

joint  creditor  of  the  firm,  and  ranks  as  such.  Ex  parte  Notting- 
ham, 10  Q.  B.  D.  88. 

(m)  See  ante,  p.  192  el  srq. ;  Ex  parte  Dobinson,  2  Deac.  341  ;  Ex 
parte  Carlisle  Canal  Co.,  ib.  349  ;  Ex  parte  Appleby,  ib.  482  ;  Ex 
parte  Benson,  2  M.  D.  &  D.  750,  and  as  to  bills  and  notes,  Ex 
parte  Flintoff,  3  M.  D.  &.  D.  726  ;  Ex  parte  Wilson,  ib.  57  ;  Be 
Clarke.  De  Gex,  153  ;  Exparte  Buckley,  14  M.  &  W.  469,  and  1 
Ph.  562,  reversing  Ex  parte  Christie,  3  M.  D.  &  D.  736, 

(ft)  See  ante,  p.  198  et  srq.  As  to  breaches  of  trust,  see  Ex  parte 
Poulson,  De  Gex,  79  ;  Ex  parte  Barnewall,  6  De  G.  M.  &  G.801. 
Compare  Ex  parte  White,  6  Ch.  397,  where  the  moneys  were  held 
not  to  be  trust  moneys  ;  and  Ex  parte  Geaves,  8  De  G.  M.  &  G. 
29r,  where,  although  there  was  a  clear  breach  of  trust  by  one 
partner,  the  others  were  not  liable  for  it.  See,  as  to  the  trustee. 
Ex  parte  Burton,  3  M.  D.  &  D.  364.  As  to  frauds,  see  Ex  parte 
Adamson,  8Ch.  D.  *07  ;  Ex  parte  Unity,  &c.,  Banking  Associa- 
tion, 3  De  G.  &  J.  63. 

(o)  Exparte  Hodgkinson,  19  Ves.  294;  Ex  parte  Norfolk,  ib. 
458  ;  Ex  parte  Law,  3  Deac.  541 . 

(p)  See  Ex  parte  Arbouin,  De  Gex,  359.  See,  also,  Scarf  v. 
Jardine,  7  App.  Ca.  345,  ante,  pp.  197,  198. 

[q)  Exparte  Bushell,  3  M.  D.  &  D.  615,  and  ante,  p.  180  et  seq. 

(r)  Exparte  Holdsworth,  1  M.  D.  &  D.  475.  As  to  indorsees 
with  notice  availing  themselves  of  the  ignorance  of  their  in- 
dorser,  see  Rooth  v.  Quinn,  7  Price,  193. 

(s)  Ex  parte  Thorpe,  3  M.  &  A.  716  ;  Ex  parte  Austen,  1  M.  D. 


PROOF  OF  DEBTS  AGAINST  BANKRUPT  PARTNERS.  771 

Bills  accepted  in  the  name  of  one  partner  only  do  Bk.  IV. 
not  give  their  holder  a  right  to  prove  against  the  joint  Chap.  4. 
estate  of  the  firm  (t). 


A  separate  creditor  does  not  acquire  a  right  to  prove  Money  of 
against  the  joint  estate,  simply  because  that  estate  has  ^"Vj1  ?™ 
had  the  benefit  of  the  money  he  seeks  to  recover  ;   nor  benefit 
does  the  joint  creditor  acquire  a  right  to  prove  against 
the  separate  estate  of  one  partner  because  he  alone  has 
had  such  benefit  (u). 

Secondly,  as  to  the  conversion  of  a  joint  into  a  separate  2.  Conversion 

debt  and  vice  versa. — A  joint  creditor  who  releases  one  of  joint  into 

of  his  debtors,  cannot  prove  against  the  estates  of  any  seP:uate 

of  the  others  (x);  and  the  doctrine  of  merger,  by  tak-  J   '  J  ,  -  ■ 
v/.  ..  o     '     j  net  versa. 

ing  a  higher  security,  or  obtaining  a  judgment  ( before 
bankruptcy)  (y),  applies  in  bankruptcy  as  well  as  at 
law,  and  has  a  most  important  influence  on  a  creditor's 
right  to  prove  against  the  joint  estate  of  a  firm,  or  the 
separate  estates  of  its  members  (z). 

A  separate  bond  given  to  secure  a  joint  debt  creates  Merger. 
a  separate  debt  (a)  and  destroys   the  joint  debt  (aa). 
A  judgment  has  the  same  effect  (6);  and  a  joint  judg- 
ment against  several  *for  a  debt  owing  by  them  jointly  L      '  -^J 
and  severally  makes  the  debt  joint  only  (c);  but  a  sep- 


&  D.  247  :  Ex  parte  Agace,  2  Cox,  312  ;  Ex  parte  Bonbonus,  8 
Ves.  540  ;  Ex  parte  Goulding  and  Davies,  2  Gl.  &  J.  118. 

(t)  Ex  parte  Bolitho,  Buck,  100  ;  but  where  the  name  of  the 
firm  and  of  the  acceptor  are  the  same,  see  Ex  parte  Law,  3  Deac. 
541. 

(m)  Ex  parte  "vVheatley,  Cooke's  Bank.  Law,  534.  ed.  8  ;  Ex 
parte  Peele.  6  Ves.  602  :  Ex  parte  Hartop,  12  ib.  349  ;  Ex  parte 
Hunter,  1  Atk.  223  ;  Ex  parte  Emly,  1  Rose,  65  ;  Be  Ferrar,  9  Ir. 
Ch.  11. 

(x)  Ex  parte  Slater,  6  Ves.  146.  So  a  creditor  may,  by  dealing 
with  his  debtor,  discharge  that  debtor's  surety,  and  on  the  bank- 
ruptcy of  the  surety  be  precluded  from  proving  against  his  estate. 
See  Ex  parU  Webster,  De  Gex,  414,  where  the  surety  was  a  firm 
which  had  accepted  bills  sought  to  be  proved  against  its  joint 
estate. 

{y)  Ex  parte  Christie,  Mon.  &  B.  352. 

(2)  See  ante,  Bk.  II.  c.  2,  \  3. 

(a)  Ex  parte  Flintoff,  3  M.  D.  &  D.  726. 

(aa)  Ex  parte  Hernaman,  12  Jur.  643. 

(6)  Kendall  v.  Hamilton,  4  App.  Ca.  504.  See  ante,  p.  193, 
and  the  Addenda  ;  Ex  parte  Higgins,  3  De  G.  &  J.  33.  As  to 
•when  the  Court  can  go  behind  the  judgment,  and  look  to  its  con- 
sideration, see  the  cases  in  Be  Tollemache,  viz.,  Ex  parte  Revell, 
13  Q.  B.  D.  720;  Ex  parte  Edwards,  14  ib.  415;  Ex  parte  Ander- 
son, ib.  606.  See,  also,  Ex  parte  Lennox,  16  ib.  315  ;  Ex  parte 
Banner,  17  Ch.  D.  480  ;  Ex  parte  Kibble;  10  Ch.  373. 

(c)  Ex  parte  Christie,  Mon.  &  Bl.  352.  But  this  does  not  ap- 
ply to  breaches  of  trust  in  respect  of  which  there  is  a  joint  and 
several  liability,  see  Re  Davison,  13  Q.  B.  D.  50. 


772 


BANKRUPTCY. 


Bk.  IV. 
Chap.  4. 
Sect.  4. 


Ex  parte 
Waterfall. 


Falling  back 
on  original 
debt  after 
taking  a 
security  for 
it. 


Ex  parte 
Whitmore. 

[*705] 


arate  judgment  of  a  joint  and.  separate  debt,  does  not 
make  it  separate  only  (d). 

Notwithstanding  the  effect  of  a  judgment  in  merg- 
ing the  debt  in  respect  of  which  it  has  been  recovered, 
it  was  held  in  Ex  parte  Waterfall  (e)  that  where  a 
firm  consisted  of  one  partner  in  this  country,  and  of 
other  partners  abroad,  and  a  creditor  of  the  firm  sued 
the  partner  here  and  recovered  judgment  against  him, 
the  debt  of  the  firm  was  not  so  extinguished  as  to  pre- 
clude the  creditor  from  proving  against  its  joint  estate 
on  the  subsequent  bankruptcy  of  the  judgment  debtor. 

"Where  a  creditor  obtains  an  additional  security  for  a 
pre-existing  debt,  and  that  security  is  not  of  such  a 
nature  as  to  merge  the  debt,  he  may,  if  the  security  be- 
comes unavailable,  fall  back  on  the  original  debt.  This 
is  constantly  done  by  the  creditors  of  bankrupt  partners; 
and  the  cases  show  that  a  creditor  who  takes  a  joint  bill 
for  a  separate  debt  (f),  or  a  separate  bill  for  a  joint 
debt  (g),  becomes,  as  he  intended,  a  joint  and  several 
creditor,  and  does  not  lose  his  right  of  having  recourse, 
in  case  of  need,  to  his  original  debt,  unless  he  has  taken 
the  fresh  security  in  substitution  for  his  original  de- 
mand (h).  If,  however,  he  has  done  this,  he  cannot 
fall  back  on  his  first  debt. 

Thus  in  Ex  part  Whitmore  (i),  upon  the  formation 
of  a  *  partnership  between  two  persons,  one  of  them 
wrote  to  his  bankers,  to  whom  he  was  indebted,  and 
directed  them  to  transfer  any  balance  due  from  him  to 

(d)  Drake  v.  Mitchell,  3  East.  251  ;  Ee  Clarkes,  2  Jo.  &  Lat. 
212  ;  Ex  parte  Bate,  3  Deac.  358.  See  above,  the  note  on  Ken- 
dall v.  Hamilton,  on  p.  193. 

(e)  4  De  G.  &  S.  199,  and  15  Jur.  214,  sub  nom.  Ex  parte  Jones. 
See,  too,  Ex  parte  Dunlop,  Buck,  253,  and  Ex  parte  Stanborough, 
5  Madd.  89,  as  to  actions  against  several  partners,  some  of  whom 
were  outlawed.  See  above,  the  note  on  Kendall  v.  Hamilton,  on 
p.  193. 

(/)  Ex  parte  Seddon,  2  Cox,  49  ;  Ex  parte  Lobb,  7  Ves.  592; 
Exparte  Meinertzhagen,  3  Deac.  101  ;  Ex  parte  Hay,  15  Ves.  4  ; 
Ex  parte  Kedie,  2D.  &  Ch.  321.  See  above,  the  note  on  Kendall 
v.  Hamilton,  on  p.  193. 

(g)  Keay  v.  Fenwick,  1  C.  P.  D.  745  ;  Bottomley  r.  Nuttall,  5 
C.  B.  N.  S.  122  ;  Ex  parte  Hodgkinson,  19  Ves.  291.  See,  too, 
Exparte  Raleigh,  3  M.  &  A.  670  ;  Exparte  Fairlie,  Mont.  17.  See 
above,  the  note  on  Kendall  v.  Hamilton,  on  p.  193. 

(h)  In  Byleson  Bills,  ed.  10,  p.  381,  it  is  said,  "The  takingof 
his  separate  bill  from  one  of  several  partners  for  a  joint  debt  will, 
as  we  have  see  (i.  e.,  on  p.  48),  discharge  the  others."  But  this 
is  going  too  far.  See  the  last  note,  and  ante,  p.  247,  where  the 
cases  referred  to  by  Mr.  Justice  Byles  are  noticed.  See  above, 
the  note  on  Kendall  v.  Hamilton,  on  p.  193. 

(t)  3  Deac.  365.  See,  too,  Ex  parte  Kirby,  Buck,  511,  and  Ex 
parte  Jackson,  2  M.  D.  &  D.  146. 


JOIXT  AND  SEPARATE  DEBTS.  I  io 

the  debit  of  the  new  firm  ;  this  was  done,  and  the  bank-  Bk.  IV. 
ers  drew  on  the  firm  for  the  amount  of  the  balance  ;  the  £haP-  4-  Sect 

bills  were  accepted  by  the  new  firm,  but  were  not  paid.  J 

The  firm  afterwards  became  bankrupt,  and  it  was  held 
that  the  bankers,  having  exchanged  debtors,  could  not 
be  considered  as  the  separate  creditors  of  their  old 
customer,  and  could  only  rank  as  joint  creditors  of  the 
firm. 

Unless,  however,  there  has  been  a  substitution  of 
debtors,  or  unless  a  creditor  has  by  reason  of  the  doc- 
trine of  merger  become  deprived  of  his  right  to  revert 
to  his  original  debt,  the  acquisition  of  a  fresh  security 
will  not  destroy  the  rights  which  he  may  have  inde- 
pendently of  that  security. 

With  respect  to  the  right  of  a  joint  creditor  to  prove  Substitution 
against  a  separate  estate  or  of  a  separate  creditor  to  of  debtors 
prove  against  a  joint  estate,  on  the  ground  that  there  can,onl^J^e 
has  been  a  substitution  of  debtors,  or  that  a  new  right  the  cre(jitor'8 
has  been  acquired,  it  is  to  be  remembered  that,  there  consent, 
can  be  no  such  substitution  or  acquisition  saved  by  the 
creditor's  consent.     Consequently,  if  a  partnership  is 
dissolved,  and  by  agreement  between  the  partners  one 
of  them  is  to  continue  the  business  and  pay  all   the 
debts,  the  creditors  of  the  firm  do  not  become  the  sepa- 
rate creditors  of  the  continuing  partner  unless  they  ac- 
cede to  the  arrangement  so  entered  into  between  him 
and    his    co-partners    (k).      Upon    precisely     similar 
grounds,  a  creditor  of  one  person  does  not  become  the 
joint  creditor  of  him  and  another  who  enters  into  part- 
nership with  him,  merely  because  the  two  partners  have 
agreed  between  themselves  that  the  debts  of  each  shall 
be  the  debts  of  both.     Unless   the  creditor  accedes  to 
that  arrangement,  he  is  not  bound  by  it,  nor  can  he 
avail  himself  of  it;  his  position  in  fact  is  unaltered,  he 
does  not  lose  his  old  right,  nor  does  he  gain  any  new 
one  (Z). 

(k)  Ante,  p.  239  et  seq.;  Ex  parte  Freeman,  Buck,  471;  Ex  parte 
Fry,  1  Gl.  &  J.  96;  Ex  parte  Gurney,  2  M.  D.  &  D.  541;  Ex 
parte  Appleby,  2  Deac.  482. 

(t)  Ante,  p.  20~>  etseq.;  Ex  parte  Jackson,  1  Ves.  J.  130;  Ex 
parte  Peele,  6  ib.  601;  Ex  parte  Williams,  Buck,  13;  Be  Littles, 
10  Ir.  Eq.  275;  Ex  parte  Parker,  2  M.  D.  &  D.  511;  Ex  parte  Gra- 
ham, ib.  781 ;  Ex  parte  Hitchcock,  3  Deac.  507.  As  to  what  is  a 
sufficient  accession,  see  Rolfe  v.  Flower,  L.  R.  1  P.  C.  27;  Bil- 
borough  v.  Holmes,  5  Ch.  D.  255;  Scarf  v.  Jardine,  7  App.  Ca. 
345,  noticed  ante,  pp.  197,  198.  Mr.  Cooke,  indeed,  lays  it  down 
that  if  new  partners  come  into  a  firm,  and  it  is  agreed  that  the 
stock  and  debts  of  the  old  firm  shall  become  those  of  the  new 
firm,  and  the  latter  becomes  bankrupt,  the  creditors  of  the  old 


774  BANKRUPTCY. 

[  *  706]  *It  is  easier  for  a  separate  creditor  to  establish  a 

Bk.  IV.  right  to  prove  against  the  joint  estate,  than  for  a  joint 

Chap.  4.  creditor  to  establish  a  right  to  prove  against  a  separate 

Sect.  4. estate;  for,  whilst  all  that  is  necessary  in  the  first  case 

Easier  for        is  to  show  that  those  who  were  not  originally  debtors, 
separate  have  become  so  (m),  it  is  necessary  in  the  last  case  to 

become  a°      show  that  a  person  already  a  debtor  with  others,  has 
joint  creditor  take  a  his  and  their  debt  upon  himself  alone.     The  dif 
than  vice         ficulty  here  adverted  to  does  not  arise  from  any  legal 
versa.  doctrine,  but  from  the  circumstance  that  what  such  a 

debtor  may  do  is  prima  facie  referable  to  his  charac- 
ter of  joint  debtor,  and  does  not  therefore  establish 
what  is  wanted,  viz.,  his  separate  liability.  For  this 
reason  it  has  been  frequently  held  that  a  joint  creditor 
of  two  or  more  persons  does  not  become  the  separate 
creditor  of  one  of  them  by  entering  into  arrangements 
with  him  for  the  payment  of  the  debt  by  him  (n);  and 
that  in  the  case  of  a  dissolution  of  partnership  a  cred- 
itor of  the  firm  who  merely  treats  the  continuing  part- 
ner as  his  debtor,  does  not  acquire  a  right  to  prove 
against  his  separate  estate  (o).  To  entitle  himself  so 
to  prove,  the  creditor  must  show  either  that  the  con- 
tinuing partner  has  become  separately  liable  for  the 
[  *  707]  *  debt  for  which  he  was  already  liable  jointly  with  his 
former  partners  (p),  or  that  there  is  no  joint  estate  (q). 

firm  may  prove  against  the  joint  estate  of  the  new  firm ;  and  he 
cites  Ex  parte  Bingham  and  Ex  parte  Clowes,  2  Bro.  C.  C.  595 
(Cooke's  Bank.  Law,  534,  ed.  8).  The  facts  of  the  first  of  these 
two  cases  are  not  stated.  Ex  parte  Clowes  was  a  very  peculiar 
"case,  and  if  it  was  ever  an  authority  for  the  doctrine  that  a  sep- 
arate debt  can,  as  between  the  partners  and  the  creditor,  become 
a  joint  debt,  or  rice  versa,  without  the  privity  of  the  creditor,  the 
case  must  be  considered  as  no  longer  law.  See  1  Mont.  Part., 
note  2  F.,  p.  117,  in  notes.  Perhaps  Mr.  Cooke  rested  the  right 
of  proof  on  the  absence  of  joint  estate,  as  in  Ex  parte  Taylor,  2 
M.  D.  &  D.  753. 

(in)  A  written  agreement  is  not  necessary  to  establish  this  Ex 
parte  Lane,  De  Gex,  300. 

(»)  Ex  parte  Raleigh,  3  M.  &  A.  670;  Ex  parte  Fairlie,  Mont. 
17;  Ex  parte  Smith,  1  M.  D.  &  D.  165. 

(o)  Ex  parte  Appleby,  2  Deac.  482;  Ex  parte  Gurney,  2  M.  D. 
&  D.  541;  Ex  parte  Fry,  1  Gl.  &  J.  96;  Ex  parte  Freeman,  Buck, 
471. 

(p)  See  Bilborough  v.  Holmes,  5  Ch.  D.  255,  and  the  cases  in 
the  last  two  notes,  and  compare  Ex  parte  Bradbury  Mon.  &  Ch. 
625,  where  a  joint  creditor 'had  acquired  a  right  to  prove  against 
a  separate  estate. 

(q)  See  Ex  parte  Taylor,  2  M.  D.  &  D.  753.  This  matter  will 
be  alluded  to  hereafter. 


PROOF  OF  DEBTS  AGAINST  BANKRUPT  PARTNERS.  775 

4.   Of  the  proof  and  payment  of  partners'1  debts  gen 
erally. 

There  is  nothing  peculiar  in  the  mode  of  proving  Bk.  IV. 
debts  by  or  against  partners,  nor  is  there  any  difference  Chap.  4.  Sect. 

between  the  claims  which  are  provable  by  or  against  _ 

them  and  claims  which  are  provable  by  and  against 
other  persons.  For  information  on  these  subjects  the 
reader  is  therefore  referred  to  treatises  on  the  law  of 
bankruptcy. 

Companies  which  are  incorporated  can  prove  their 
debts  by  a  duly  authorized  officer,  and  a  firm  can  prove 
by  any  of  its  members  (r). 

If  a  bankrupt  is  a  trustee,  and  is  himself   indebted  Bankrupt 
to  the  estate  vested  in  him,  he  ought  himself  to  prove  J™Jj;v  °ught 
against  himself  on  behalf  of  those  whose  trustee    he  ao.._nst  his 
is  (s).      It  is  important  to  bear  this  in   mind  in  those  own  estate, 
cases  in  which  an  executor  has  carried  on  his  testator's 
trade  with  assets  which  ought  not  to  have  been  employed 
therein,  and  has  subsequently  become  bankrupt. 

With  respect  to   debts   provable   against   bankrupts.  Debts  prov- 
several  important  alterations  in  the  law  have  been  made  able, 
with  a  view  to  include  all  possible  claims  arising  out  of 
contract,  so  as  to  discharge  the   bankrupt  therefrom. 
The  present  law  is  contained  in  the  following  enact- 
ment of  the  Bankruptcy  act,  1883  : — 

\  37.   (1.)  Demands  in  the  nature  of  unliquidated  damages  Description 
arising  otherwise  than  by  reason  of  a  contract,  promise,  or  breach  of  debts 
of  trust  («),  shall  not  be  provable  in  bankruptcy.  bankruptcy. 

*  (2.)  A  person  having  notice  of  any  act  of  bankruptcy  avail*-  r  *  7Qg  l 
ble  against  the  debtor  shall  not  prove  under  the  order  for  any 
debt  or  liability  contracted  by  the  debtor  subsequently  to  the 
date  of  his  so  having  notice. 

(3.)  Save  as  aforesaid,  all  debts  and  liabilities,  present  or 
future,  certain  or  contingent,  to  which  the  debtor  is  subject  at 
the  date  of  the  receiving  order,  or  to  which  he  may  become  subject 
before  his  discharge  by  reason  of  any  obligation  incurred  before 
the  date  of  the  receiving  order,  shall  be  deemed  to  be  debts 
provable  in  bankruptcy  (u). 

(r)  46  &  47  Vict,  c   52  ?  148. 

(s)  See  Ex  parte  Richardson,  Buck.  202,  and  3  Madd.  138  ;  Ex 
parte  Shaw,  1  Gl.  &  Jam.  127. 

(t)  Before  the  act,  demands  arising  from  breaches  of  trust  were 
provable,  and  were  treated  as  arising  out  of  contract  rather  than 
out  of  tort,  Emma  Silver  Mining  Co.  v.  Grant,  17  Ch.  D.  122  ; 
Ramskill  V.  Edwards,  31  Ch.  D.  100. 

(m)  As  to  future  calls,  see  Re  Mercantile  Mutual  Marine  Ins. 
Ass.,  25  Ch.  J>.  415.  As  to  covenants  to  assign  aiter-acquired 
property,  Collyer  v.  Isaacs,  19  Ch.  D.  342. 


776  BANKRUPTCY. 

Bk.  IV.  (4.)  ,An  estimate  shall  be  made  by  the  trustee  of  the  value   of 

Chap.  4.  Sect.  any  tiebt  or  liability  provable  as  aforesaid,  which  by  reason  of 

its  being  subject  to  any  contingency  or  contingencies,  or  for  any 

other  reason,  does  not  bear  a  certain  value. 

(5.)  Any  person  aggrieved  by  any  estimate  made  by  the  trustee 
as  aforesaid  may  appeal  to  the  Court. 

(6.)  If,  in  the  opinion  of  the  Court,  the  value  of  the  debt  or 
liability  is  incapable  of  being  fairly  estimated,  the  Court  may 
make  an  order  to  that  effect,  and  thereupon  the  debt  or  liability 
shall,  for  the  purposes  of  this  Act,  be  deemed  to  be  a  debt  not 
provable  in  bankruptcy  (x). 

(7.)  If,  in  the  opinion  of  the  Court,  the  value  of  the  debt  or  lia- 
bility is  capable  of  being  fairly  estimated,  the  Court  may  direct 
the  value  to  be  assessed,  before  the  Court  itself  without  the  in- 
tervention of  a  jury,  and  may  give  all  necessary  directions  for 
this  purpose,  and  the  amount  of  the  value  when  assessed  shall 
be  deemed  to  be  a  debt  provable  in  bankruptcy. 

(8.)  "Liability"  shall  for  the  purposes  of  this  Act  include  any 
compensation  for  work  or  labour  done,  any  obligation  or  possi- 
bility of  an  obligation  to  pay  money  or  money's  worth  on  the 
breach  of  any  express  or  implied  covenant,  contract,  agreement, 
or  undertaking,  whether  the  breach  does  or  does  not  occur,  or 
is  not  likely  to  occur  or  capable  of  occurring  before  the  dis- 
charge of  the  debtor,  and  generally  it  shall  include  any  express 
or  implied  engagement,  agreement,  or  undertaking,  to  pay, 
or  capable  of  resulting  in  the  payment  of  money,  or  money's 
worth,  whether  the  payment  is,  as  respects  amount,  fixed  or  un- 
liquidated ;  as  respects  time,  present  or  future,  certain  or  de- 
pendent on  any  one  contingency  or  on  two  or  more  contingencies  ; 
as  to  mode  of  valuation  capable  of  being  ascertained  by  fixed 
rules,  or  as  matter  of  opinion  (y). 

Moreover,  by  Sched  2,  it  is  declared  that  as  to  future 
debts  : 


Future  debts. 


21.  A  creditor  may  prove  for  a  debt  not  payable  when  the 
debtor  committed  an  act  of  bankruptcy  as  if  it   were  payable 
presently,    and  may  receive  dividends  equally  with  the  other 
T  *  7091  creditors,  deducting  only  thereout  *  a  rebate  of  interest   at   the 

rate  of  five  pounds  per  centum  per  annum  computed  from  the 
declaration  of  a  dividend  to  the  time  when  the  debt  would  have 
become  payable,  according  to  the  terms  on  which  it  was  con- 
tracted. 

(.r)  Where  no  order  is  made,  the  debt  is  treated  as  provable, 
Morgan  v.  Hardy,  18  Q.  B.  D.  646. 

{y)  See,  as  to  actions  for  torts.  Ex  parte  Brooke,  3  Ch.  D.  494, 
where  a  verdict  was  obtained  before  adjudication  :  and  as  to 
claims  to  indemnity,  Kellock  v,  Enthoven,  L.  R.  9  Q.  B,  241,  and 
8  ib.  458. 


PROOF  OF  DEBTS — SECURED  CREDITORS.  777 

Further  it  is  enacted  by  §  10  as  follows: —  Bk.  IV. 

Chap.  4. 

\  10.   (2.)  The  Court  may  at  any  time  after  the  presentation  of  ' 


a  bankruptcy  petition  stay  any  action,  execution,  or  other  legal  Power  of 
process  against  the  property  or  person  of  the  debtor,  and  any  Court  to 
Court  in  which  proceedings  are  pending  against  a  debtor  may,  b     j-      ~ 
on  proof  that  a  bankruptcy  petition   has  been  presented   by  or 
against  the  debtor,  either  stay  the  proceedings  or  allow  them  to 
continue  on  such  terms  as  it  may  think  just. 

With  certain  exceptions  (z),  the  assets  in  the  hands  Assets  dis- 
of  the  trustee  are  distributable  pari  passu  amongst  all  tributable 
the  unsecured  creditors  for  value  of  the  bankrupt,  with-  pari  passu. 
out  regard  to  the  question  whether  they  are  creditors 
by  specialty  or  by  simple  contract  (a). 

The  position  of  secured  creditors  is  peculiar  and  re-  Secured 
quires  special  notice.  creditors. 

What  creditors  have  securities  for  the  debts  due  to 
them  and  what  have  not,  and  the  nature  of  the  securi- 
ties, if  any,  to  which  they  are  entitled  are  matters  be- 
yond the  scope  of  the  present  work  (6).  But  the  rights 
of  the  drawers,  acceptors,  and  indorsees  of  bills  of  ex- 
change, which  are  secured  by  legal  or  equitable  charges 
upon  goods  or  other  property,  have  so  often  to  be  con- 
sidered in  the  event  of  the  bankruptcy  of  commercial 
firms,  that  a  few  observations  on  such  rights  may  not 
be  out  of  place. 

Nothing  is  more  common  than  for  the  owner  of  goods  Secured  bills 
to  pledge  them   in  some  form  or  other  to  some  persons, 
who,  having  them  as  his  security,  will  accept  a  bill  of 
exchange  drawn  upon  him  by  their  owner.      The  drawer 
then  discounts  the  bill,  and  thus  obtains  cash. 

As  between  the  drawer  and  the  acceptor  the  question 
*  constantly  arises  as  to  the  extent  of  the  security;  e.  g.,  [  *710] 
whether  the  goods  have  been  pledged  for  particular 
bills  only,  or  to  cover  all  the  bills  of  the  drawer,or  to  cover 
whatever  may  be  due  froni  the  drawer  to  the  acceptor, 
so  that  the  proceeds  are  to  be  dealt  with  generally  on 
account,  the  goods  not  being  specifically  appropriated 
to  anything  in  particular.  The  rights  of  the  drawer 
and  acceptor  obviously   depend    on   the   answers  to  be 

(z)  The  exceptions  are  enumerated  in  4(i  &  47  Vict.  c.  ~r2,  §|  40, 
41.  and  42;  they  relate  to  rates,  taxes,  wages  apprenticship  fees 
and  rent.    Bee,  as  to  Savings  Hanks,  Re  Williams,  :'><i  Ch.  !»•  573, 

(a)  As  to  voluntary  bonds,  see  Ex  parte  Berry,  19  Ves.  218; 
/■>  parte  Hookins,  ::  De  G.  &  S.  549. 

(b)  Execution  creditors  are  secured  by  the  seizure  of  the  sher- 
iff, E.r  parte  Jones,  10  Ch.  <;<>:'>:  Ex  parte  Jameson.  3  Ch.  D.  488; 
Edwards  v.  Scarsbrook,  3  B,  &  Sin,  280,  See  as  to  them,  ante,  p. 
674  et  seq 


78 


BANKRUPTCY. 


Bk.  IV. 

Chap.  4. 
Sect.  4. 


Eight  of 
drawer. 


Right  of 
acceptor. 


Effect  of 
[*711] 
bankruptcy, 
of  drawer ; 


given  to  these  questions,  which  are  questions  of  fact, 
very  often  turning  on  correspondence  and  the  course  of 
dealing  between  the  parties,  and  sometimes  very  diffi- 
cult to  determine  (c). 

But  withoat  solving  these  questions,  it  is  to  be  ob- 
served, that  the  right  of  the  drawer  is  to  redeem  the 
goods  on  paying  the  amount  due  upon  them;  or,  if 
they  have  been  sold,  to  have  an  account  of  their  pro- 
ceeds, and  to  have  them  applied  in  paying  such  amount, 
and  to  have  the  surplus  paid  back  to  him,  subject  to 
such  lien  or  set-off,  if  any,  as  the  acceptor  may  have 
against  them  on  some  other  account. 

The  acceptor,  on  the  other  hand,  is  entitled  to  hold  the 
goods  as  a  security  and  indemnity  against  his  liability 
on  the  bill.  If  he  pays  the  bill  out  of  his  own  moneys, 
he  becomes  the  creditor  of  the  drawer  for  the  amount, 
and  can  sue  him  for  it,  unless  it  is  part  of  the  agree- 
ment between  them  that  before  having  recourse  to  the 
drawer  personally  the  acceptor  shall  realize  the  goods 
and  so  reduce  the  liability  of  the  drawer.  In  the  ab- 
sence, however,  of  some  agreement  to  this  effect,  it 
seems  that  the  drawer  has  no  more  right  than  any  other 
mortgagor  to  have  the  security  given  by  him  realised 
before  he  is  himself  called  upon  for  payment  (rf).  The 
object  of  giving  the  security  is  to  keep  the  acceptor  out 
of  cash  advances,  but  not  to  prevent  him  from  making 
advances  on  the  credit  of  the  drawer  if  the  acceptor 
thinks  proper  to  do  so. 

In  the  event  of  the  bankruptcy  of  the  drawer,  his 
trustee  is  *  entitled  to  no  greater  rights  than  the  drawer 
would  be  if  solvent,  unless  indeed  the  goods  can  be 
claimed  by  the  trustee  under  the  reputed  ownership 
clause.  On  the  other  hand,  the  acceptor  has  the  same 
rights  as  before  (e),  with  this  qualification,  that  his 
right  of  action  against  the  drawer  is  converted  into  a 
right  of  proving  against  his  estate,  and  that  if  the 
right  of  proof  is  exercised  the  security  must  be  given 

np(/)- 

(c)  See,  for  example.  Ex  parte  Dever,  13  Q.  B.  D.  766,  and  14 
ib.  611;  Re  Broad  13  Q.  B.  D.  740,  and  Re  Gothenburg  Commer- 
cial Co.,  29  W.  E.  358,  there  referred  to. 

(d)  So  long  as  the  acceptor  is  solvent,  the  drawer  does  not 
seem  to  be  entitled  to  have  the  goods  realised,  and  applied  in 
taking  up  the  bills.  His  right  seems  to  be  to  redeem  the  goods. 
See  Ex  parte  Dever  (No.  2),  14  Q.  B.  D.  611. 

(e)  See  Ex  parte  Flower,  2  Mod.  &  A.  224,  where  tht  drawer's 
assignees  received  proceeds  of  the  goods,  and  the  acceptor  was 
held  entitled  to  have  the  money  applied  in  taking  up  the  bills. 
See,  also,  Ex  parte  Imbert,  1  De  G.  &  J.  152. 

(/)  See  infra,  as  to  this. 


PROOF  OF  DEBTS — SECURED  BILLS.  779 

In  the  event  of  the  bankruptcy  of  the  acceptor,  his  Bk.  IV. 
trustee  can  hold  the  goods  subject  to  the  right  of  the  ^P-44- 
drawer  to  redeem  them,  or  to  have  them  applied  in  talc- 


ing  up  the  bills  drawn  against  them  (g).  If  the  goods  of  acceptor, 
are  sold  by  the  trustee  and  they  realise  less  than  the 
amount  of  the  bills,  the  trustee  is  entitled  to  the  differ- 
ence from  the  drawer  ;  whilst  if  they  realise  more,  the 
trustee  must  hand  the  difference  to  him,  subject  to  any 
lien  or  set-off  to  which  the  proceeds  may  be  subject  on 
some  other  account.  If  the  goods  are  sold  before  the 
bankruptcy,  the  proceeds,  unless  specifically  appropri- 
ated to  the  bills,  become  a  mere  debt  due  to  the  drawer, 
for  which  he  can  only  prove  against  the  acceptor's  es- 
tate (h). 

If  the  bill  has  been  negotiated  by  the  drawer,  further  Right  of 
complications  arise.     It  is  now  clearly  settled   (i)  that  holder, 
the  indorsement  of  the  bill  by  the  drawer  without  more, 
does  not    confer  upon   the   holder  the  benefit   of   the 
security  given  by  the  drawer  to  the  acceptor  (k),  even 
although  the  bill  refers  to  the   goods  and  to  a  letter  of  ^ 
advice  accompanying  it  (I).     But  the  benefit  *  of  the  [  *712] 
security,  i.e.,  the  right  to  have  the  goods  sold  and  ap- 
plied in   taking  up  the   billj  may  transferred  to  the  in- 
dorsee of  the  bill,  and  when  such  is  the  case  he  will  be 
entitled  to  have  the  goods  so  applied  (to).     Unless,  how- 
ever, the  holder  is  the  transferee  of  the  security  as  dis- 
tinguished from  the  bill,  his  remedy  is  on  the  bill  itself, 
viz.,  first  against  the  acceptor,  and  secondly  against  the 
drawer.     This,  moreover,  is  the  case  not  only  when  both 
drawer  and  acceptor  are  solvent,  but  also  in  the  case  of 
the  bankruptcy  of  either  of  them  (n). 

(g)  See  Ex  parte  Dever,  13  Q.  B.  D.  766,  and  Ex  parte  Dever 
(No.  2),  14  ib.  611. 

(A)  Ex  parte  Dever,  13  Q.  B.  D.  766,  and  S.  C.  (No.  2),  14  ib. 
611. 

(0  Notwithstanding  Frith  v.  Forbes,  4  De  G.  F.  &  J.  409,  see 
the  cases  in  the  next  notes,  and  especially  Phelps,  Stokes  &  Co. 
v.  Comber,  29  Ch.  D.  813;  Brown,  Shipley  &  Co.  v.  Kough,  ib. 
848. 

(Jfc)  Banner  v.  Johnston,  L.  R.  5  Ho.  Lo.  157,  and  the  cases  in 
the  next  two  notes. 

(/)  Robey  and  Co.'s  Perseverance  Iron  Works©.  Oilier,  7  Ch. 
695;  Ex  parte  Dever.  13  Ch.  D.  766;  Phelps,  Stokes&  Co.  v.  Com- 
ber, 29  ib.  813,  and  Brown,  Shipley  &  Co.  v.  Kough,  ib.  848. 
These  cases  cannot  be  reconciled  with  Frith  v.  Forbes,  unless 
it  be  on  the  grounds  suggested  in  29  Ch.  D.  870-872. 

(m)  As  in  Inman  ».  Clare,  Johns.  769;  Be  Agra  and  Master- 
man's  Bank,  2  Ch.  391. 

[n)  See  the  cases  in  the  last  four  notes,  and  Ex  parte  General 
South  American  Co.,  10  Ch.  635  ;  Vaughan  v.  Halliday,  9  Ch. 
561. 


780 


BANKRUPTCY. 


Bk.  IV. 
Chap.  4. 
Sect.  4. 


Rule  in  Ex- 

parte 

Waring. 


[*713] 


Application 
of  rule. 


But  if  both  are  bankrupt,  the  case  is  different  ;  for 
the  Court  having  then  to  administer  both  the  estate  of 
the  drawer  and  the  estate  of  the  acceptor,  will  apply 
the  goods  pledged  in  taking  up  the  bills  which  were 
drawn  against  them.  This  is  the  celebrated  rule  in 
Ex  parte  Waring  (o),  which  is  of  such  great  import- 
ance in  administering  the  estates  of   commercial  firms. 

The  rule  in  Ex  parte  Waring  is  that  if  both  the 
drawer  and  the  acceptor  of  a  bill  of  exchange  become 
bankrupt,  the  holder  of  the  bill  is  entitled  to  have  any 
securities  held  by  the  acceptor  for  it  applied  in  taking 
it  up.  The  rule  is  based  upon  the  following  consider- 
ations :  the  property  held  by  the  acceptor  for  the  bill 
cannot  be  applied  in  payment  of  his  general  creditors, 
because  it  is  held  by  him  for  a  particular  purpose,  and 
on  trust  to  relieve  the  drawer  from  his  obligation  to  pay 
the  bill  on  which  the  acceptor  is  primarily  liable,  but 
which  being  bankrupt  be  cannot  pay.  On  the  other 
hand,  the  property  cannot  be  applied  in  payment  of  the 
general  creditors  of  the  drawer  because  it  is  pledged  to 
the  acceptor,  and  the  drawer  is  not  entitled  to  have  the 
property  back  except  on  redeeming  it,  or  in  other  words 
himself  paying  the  bill.  The  Court,  therefore,  applies 
the  property  in  such  a  way  as  to  give  effect  as  far  as 
possible  to  the  respective  rights  of  both  drawer  and  ac- 
ceptor under  the  circumstances  of  their  being  both 
*  bankrupt,  or,  as  the  phrase  is,  according  to  the  equi- 
ties between  the  two  estates.  The  result  is  that  the 
securities  are  applied  as  both  parties  intended  that  they 
should  be,  viz.,  in  taking  up  the  bill  in  respect  of  which 
they  were  given  (p).  Moreover  this  rule  has  been  ex- 
tended to  cases  where  the  estates  of  the  drawer  and  the 
acceptor  are  both  insolvent,  and  are  under  judicial  ad- 
ministration although  not  in  bankruptcy  (q). 

Such  being  the  principle  of  the  rule,  it  is  obvious 
that  whether  the  security  is  given  to  cover  one  bill  or 
several  is  immaterial,  except  that  if  given  for  several 
the  rule  will  benefit  the  holders  of  all  of  them   (?•); 

(o)  19  Ves.  345.  The  principle  of  the  rule  was  much  discussed 
in  Royal  Bank  of  Scotland  v.  Commercial  B;mk  of  Scotland.  7 
App.  Ca.  olid,  and  is  clearly  explained  in  City  Bank  v.  Luckie,  5 
Ch.  773.     See.  generally,  Eddis  on  Ex  parte  Waring. 

(p)  See  the  judgment  of  Cotton,  L.  J.,  in  Ex  parte  Dever  (No. 
2),  14  Q.  B.  D.  623. 

(q)  Powles  v.  Hargreaves,  3  De  G.  M.  &  G.  430;  Ex  parte  Alli- 
ance Bank.  4  Ch.  423;  Bank  of  Ireland  v.  Perry.  L.  R.  7  Ex.  14; 
Hickie  &  Co.'s  case,  4  Eq.  226. 

(r)  Ex  parte  Dever  (No.  2),  14  Q.  B.  D.  611,  where  the  security 
was  given  for  some  bills  only,  and  the  holders  of  them  got  paid 
in  full. 


RULE  IN  EX  PARTE  WARING.  7S1 

further  the  rule  applies  whether  the  value  of  the  secu-  Bk.  IV. 
rities  is  less  than  the  amount  of  the  bills  drawn  against  ggCatp'44' 

them  or  not  (s);  and  whether  the  holders  of  the  bills U 

knew  that  they  were  secured  or  not  (*).  Nor  is  it  nec- 
essary that  the  remitter  of  the  bill  should  have  endorsed 
it  (u).  But  the  right  is  subject  to  the  prior  rights  of 
the  joint  creditors,  if  any,  of  the  drawer  and  acceptor  to 
have  the  securities  treated  as  joint  assets  (x).  The 
principle  of  these  decisions  applies  where  the  drawer 
and  acceptor  are  companies  in  liquidation,  at  all  events, 
if  they  are  also  insolvent ;  but,  it  has  been  said,  not 
otherwise  (y).  But  the  rule  is  based  on  the  equities 
between  the  drawer  and  the  acceptor,  and  has  been  held 
not  to  apply  if  the  acceptor  has  a  general  lien  on  all 
securities  of  the  drawer  in  his  hands  for  the  general 
balance  of  his  account  (2);  nor  where  the  bill  holder 
has  already  received  by  way  of  dividend  more  than  the 
value  of  the  securities  (a);  nor  where  circumstances 
have  occurred  which  have  rendered  the  securities  no 
longer  applicable  to  take  up  the  bill  (b).  The  *  cir-  [  *  714] 
cumstance,  however,  that  the  security  was  given  to  cover 
other  liabilities  besides  the  bill  in  question,  is  not  ma- 
terial if  in  the  events  which  have  happened  there  is  no 
other  liability  to  be  covered  by  it  (c). 

Passing  now  to  the  position  of  secured  creditors  in  Proof  of 
the  event  of  the  bankruptcy  of  their  debtor,  the  rule  is  *e™trged 
that  a  creditor  whose  debt  is  secured  is  not  allowed  to 
retain  his  security  and  also  to  prove  in  competition  with 
the  other  creditors.  Such  a  creditor  cannot  prove  his 
debt  or  any  part  of  it  withoat  giving  the  other  creditors 
the  benefit  of  his  security  (d).  This,  however,  he  can 
do  in  one  of  two  ways,  viz.,  either  realize  his  security, 
or  give  credit  for  its  value,  and  prove  for  the  balance 
then  remaining  due  to  him  ;  or  give  up  his  security 
altogether  and  prove  for  his  whole  debt  (e).  The  trus- 
ts) lb. ;  Powles  r.  Hargraves,  3  De  G.  M.  &  G.  430. 

\t)  Ex  parte  Perfect,  Mont.  25. 

(u)  Ex  parte  Smart,  8  Ch.  220. 

(a;)  Ex  parte  Dewhurst,  8  Ch.  965. 

(y)  Hickie  &  Co.'s  case,  4  Eq.  226.  Sed  qu.  See  the  cases  in 
note  (q). 

(2)  lb.     Sed  qu.     See  Ex  parte  Dever  (No.  2),  14  Q.  B.  D.  611. 

(a)  Loder's  case,  6  Eq.  491. 

(6)  As  in  Ex  parte  Alliance  Bank,  4  Ch.  423. 

ui  City  Bank  r.  Luckie,  5  Ch.  773;  but  see,  contra,  Levi  & 
Co.'s  case,  7  Eq.  449. 

(d)  46  &  47  Vict,  c.  52.  ?  39,  and  Sched.  2,  rr.  9  to  17.  If  he 
proves  lor  the  whole  debt  he  loses  the  benefit  of  his  security; 
Couldery  v.  Bartrum,  19  Ch.  D.  394  :  Ex  parte  Solomon,  1  Gl.  & 
Jam.  25;  Grngeon  v.  Gerrard,  4  Y.  &  C.  Ex.  119. 

(c)  46  &  47  Vict.   c.  51,  \  39,  and  Sched.  2,   rr.  9  to  17.     See 


782  BANKRUPTCY. 

Bk.  IV.  tee  may  redeem  the  security  at  its  assessed  value  :  or 

Chap.  4.  ke  may  hHVe  the  security  sold  (/).      The  valuation  and 

•    ' proof  by  the  creditor  may  be  amended  by  leave  of  the 

Court  (g) ;  and,  if  the  scurity  is  sold  after  being  valued, 
the  amount  realized  is  to  be  treated  as  its  value,  and 
dividends  are  to  be  calculated  on  the  balance  and  to  be 
rectified  accordingly  if  necessary  (h). 
Secured  If  the  creditor's  security  is  sufficient  to  pay  what  is 

creditor  not    <jue  t0  him?  there  is  no  necessitv  for  him  to  apply  to 

to'^ve1?16    tbe  Court  at  a11 '   but  if  {t  is  insufficient>  be  commonly 
his  security,    applies  to  the  Court  to  have  his  security  realised  under 
it's  direction,  to  have  the  proceeds  applied  in  discharge 
of  his  debt,  and  to  have  liberty  to  prove  for  the  differ  - 
[  *  715]        ence  (i).     The  *  trustee,  however,  has  no  power  to  com- 
pel a  secured  creditor  to  take  this  course  ;  nor  can  the 
trustee  deprive  him  of  his  security  without  paying  in 
Observations  ^un  what  may  be  due  to  him  upon  it  (k).     Moreover,  it 
on  equitable   must  be  borne  in  mind  that  an  equitable  mortgage  may 
securities.        De  created  by  deposit  of  deeds  (I)  without  any  written 
memorandum  :  and,  if  originally  made  for  a  particular 
debt,  may  be  extended  by  parol  to  some  other  debt  (m); 
and  that  a  creditor  who  has  a  security  not  exclusively 
appropriated  to  a   particular  debt  may,  on  the  bank- 
ruptcy of  his  debtor,  appropriate  that  security  to  any 
debt  which  may  be  owing  to  him  by  the  bankrupt  (n). 
Moreover,  a  security  may  be  more  extensive  as  against 
one  person  than  as  against  another,  e.  g.,  more  exten- 
sive as  against  a  principal  debtor  than  as  against  his 
surety  (o). 

Ex  parte  Prescott,  4D.  &  Ch.  23,  in  which  the  rule  was  applied 
to  joint  debts  and  joint  securities. 

{})  46  &  47  Vict.  c.  52,  Sched.  2,  r.  12. 

\g)  lb.  rr.  13  and  14. 

(h)  lb.  r.  15.  See  under  the  former  act.  Soeiete  G£n.  de  Paris 
v.  Green,  8  App.  Ca.  (i(>6,  and  Couldery  r.  Bartrum,  19  Ch.  D. 
394. 

(i)  Bonds,  bills  of  exchange,  and  other  personal  securities  in 
the  hands  of  a  creditor  are  treated  like  real  securities.  Ex  parte 
Hellier,  Cooke's  Bank.  146,  ed.  8.  But  not  bills  discounted  by 
a  banker  and  held  pending  discount.  Ex  parte  Schofield,  12  Ch. 
D.  337. 

(k)  Ex  parte  Jackson,  5  Ves.  357  ;  Ex  parte  Topham,  1  Madd. 
38.     And  see  Davis's  case,  12  Eq.  516. 

(1)  As  to  the  necessity  for  which,  see  Ex  parte  Broderick,  18  Q. 
B.  D.  766. 

(wj)  See  Ex  parte  Barnett,  De  Gex,  194  ;  Ex  parte  Ford,  3  M. 
D.  &  D.  457 ;  Ex  parte  Moss,  13  Jur.  866. 

(h)  See  Ex  parte  Johnson,  3  De  G.  M.  &  G.  218  ;  Ex  parte 
Hunter,  6  Ves.  94.  Compare  Ex  parte  McKenna,  7  Jur.  N.  S. 
588,  which  turned  on  the  terms  of  the  deposit,  gee  further,  on 
this  subject,  the  cases  referred  to,  ante,  p.  651  et  seq, 

(o)  Ex  parte  Walker,  3  Deac.  672. 


PROOF  OF  DEBTS — SECURED  CREDITORS.  783 

The  rule  which  precludes  a  secured  creditor  from  re-  Bk.  IV. 
taining  his  security  and  also  proving  for  his  debt,  ap-  ye™t  4  ' 
plies  only  where  the  debt  is  payable  out  of  the  estate 


to  which  the  security  belongs;  or  in  other  words,  only  Cases  in 
where  the  same  estate  is  debtor  to  the  amount  due  on  wnicn  a 
the  security,  and  creditor  by  the  value  of  the  same  se   creciitor  can 
curity    (p).      Consequently   a  creditor  of   a  bankrupt  prove  and 
.arm   of  two  partners,  holding   a  security  given   by    a  also  retain 
larger  firm  of  which  the  bankrupts  are  members,  is  not  ms  security, 
affected  by  the  rule  in  question;  he  may  prove  for  the 
whole  amount  of  the  debt  against  the  estate   of  the 
bankrupt  firm,  and  yet  retain  the  security  given  by  the 
larger  and  solvent  firm  (q).     So,  if  one  partner  mort- 
gages his  own  property  for  *the  debt  of  the  firm,  the  [  *  716] 
creditor  is  allowed  on  the  bankruptcy  of  the  firm  to 
prove  for  his  whole  debt  against   the   joint   estate,  and 
yet  retain  the  mortgage  security  given  by  the  one  part- 
ner (r). 

If  a  partner  gives  as  a  security  for  a  debt  of  the  firm 
shares  standing  in  his  own  name,  the  right  of  the  cred- 
itor to  prove  for  his  whole  debt  and  retain  his  security 
depends  upon  whether  as  between  the  partners  them- 
selves the  shares  are  assets  of  the  firm,  or  the  separate 
property  of  the  partners  in  whose  name  they  stand:  if 
they  are  assets  of  the  firm,  they  must  be  so  treated,  even 
although  the  creditor  was  not  aware  of  the  fact  when 
he  took  them  as  security  (s). 

Again,  if  A.  and  B.  are  partners,  and  A.  gives  a  sep- 
arate security  for  a  partnership  debt  and  dies,  and  B. 
becomes  bankrupt,  the  creditor  can  prove  against  B.'s 
estate  without  giving  up  his  security  (t).     So,  where  a 


(p)  Ex  parte  West  Riding  Union  Banking  Co.,  19  Ch.  D.  105, 
where  half  the  security  belonged  to  the  bankrupt  aud  half  to 
his  late  partners.  The  question  whether  this  is  the  case  or  not 
is  sometimes  one  of  considerable  difficulty,  as  in  the  case  just 
cited  and  in  Ex  parte  Brett,  6  Ch.  838,  but  the  principle  is  clear. 

{q)  Ex  parte  Parr,  1  Rose,  76;  Ex  parte  Bloxham,  6  Ves.  449; 
Ex  parte  Goodman,  3  Madd.  373;  Ex  parte  Sarumou,  1  D.  &  C. 
564.  See,  too,  Ex  parte  English  and  American  Bank,  4  Ch.  49; 
and  Ex  parte  Wilson,  2  Jur.  67,  where  a  creditor  of  two  firms 
engaged  in  a  joint  transaction,  proved  against  one  and  retained 
his  security  against  the  other. 

(r)  Ex  parte  Caldicott,  25  Ch.  D.  716;  Ex  parte  Peacock,  2  Gl. 
&  J.  27;  Ex  parte  Adams,  3  M.  &  Ayr.  157;  Ex  parte  Groom,  2 
Deac.  265.  See,  also,  the  next  note,  and  Ex  parte  Manchester 
and  Liverpool  District  Banking  Co.,  18  Eq.  249,  a  case  of  a  com- 
position. 

(s)  Ex  parte  Manchester  and  County  Bank,  3  Ch.  D.  481;  Ex 
parte  Connell,  3  Deac.  201. 

(t)  Ex  parte  Bowden,  1  D.  &  C.  135;  Ex  parte  Smyth,  3  Deac. 
597. 


t&': 


BANKRUPTCY. 


Bk.  IV. 
Chap.  4. 

Sect.  4. 


[  *  717] 


Position  of 
cestuis  que 
trustent. 


Ex  parte 
Turney. 


creditor  of  a  firm  has  a  security  belonging  to  the  firm 
and  also  a  separate  covenant  for  payment  by  each  part- 
ner, such  creditor  may,  on  the  bankruptcy  of  the  firm, 
retain  his  security  and  prove  against  the  separate  es- 
tates of  the  covenantors  (u).  Again,  where  a  firm  has 
assigned  its  property  in  trust  for  its  creditors,  whose 
rights  against  the  separate  estates  of  the  partners  are 
expressly  reserved,  a  creditor  who  is  both  a  joint  and  a 
separate  creditor  may  claim  the  benefit  of  the  assign- 
ment, and  yet  prove  as  a  separate  creditor  against  one 
of  the  firm  if  he  becomes  bankrupt  (x).  Where,  how- 
ever, one  partner  only  is  bankrupt,  and  a  joint  creditor 
is  secured  by  a  mortgage  of  the  bankrupt's  separate 
estate,  that  creditor  cannot  prove  as  a  separate  *  cred- 
itor without  giving  up  his  security  (y);  and  if  the 
mortgage  is  a  mere  equitable  mortgage,  giving  the  cred- 
itor no  locus  standi  as  a  separate  creditor  and  nothing 
more  than  a  lien,  he  will  not  be  a  separate  creditor  of 
the  bankrupt,  or  be  allowed  to  prove  against  his  sepa- 
rate estate  at  all  (z). 

The  rule  which  enables  a  joint  creditor,  having  a 
separate  security,  to  prove  as  a  creditor,  and  yet  retain 
his  security,  applies  to  persons  who  claim,  not  as  credit- 
ors merely,  but  also  as  cestuis  que  trustent.  Conse- 
quently, if  A.,  B.,  and  C.  are  bankers,  having  trust- 
monies  in  their  hands,  and  A.  afterwards  improperly 
invests  some  of  it  on  a  mortgage,  the  cestuis  que  trus- 
tent may,  on  the  bankruptcy  of  the  firm,  claim  the  bene- 
fit of  the  mortgage,  and  prove  against  the  joint  estate 
of  the  firm  for  the  whole  amount  due  from  it  in  respect 
of  the  trust  monies  (a). 

A  curious  and  instructive  case  on  the  right  of  a  cred- 
itor to  to  prove  without  giving  up  his  security,  arose  in 
Ex  parte  Turney  (b).  There  A.  and  B.,  father  and  son, 
were  partners  ;  A.  equitably  mortgaged  an  estate  of  his 
own  to  secure  a  debt  due  from  B.  A.  afterwards  died, 
and  the  estate  descended  to  B.,  subject  to  the  mortgage 

(u)  Be  Plurnmer,  1  Ph.  56,  settling  the  doubts  raised  in  Ex 
parte  Shepherd,  1  M.  D.  &  D.  101,  and  Ex  parte  Davenport,  ib. 
313. 

(x)  Ex  parte  Thornton,  5  Jur.  N.  S.  212.  See,  too,  Ex  parte 
Geaves,  8  De  G.  M.  &  G.  291. 

(y)  Ex  parte  "West  Riding  Union  Banking  Co.,  19  Ch.   D.    in.",. 

(z)  Ex  parte  Leicestershire  Banking  Co.,  De  Gex,  292;  Ex 
parte  Lloyd,  3  M.  &  A.  601.  The  Courts  will,  however,  order 
the  security  to  he  sold  to  enable  the  creditor  to  vote  in  the 
choice  of  a  trustee,  &c,  ibid. 

(a)  See  Ex  parte  Biddulph,  3  DeG.  &  S.  587,  and  Ex  parte  Bur- 
ton. 3  M.  D.  &  D.  364. 

(6)  3  M.  D.  &  D.  576.     See,  also,  Ex  parte  Brett,  6  Ch.  839. 


PROOF  OF  DEBTS — SECURED  CREDITORS.  785 

in  question.     At  A.'s  death,  however,  the  joint  debts  of  Bk.  IV. 
A.  and  B.  were  more  than  sufficient  to  exhaust  A.'s  as-  ^  ^.p'. 

sets.      B.   having  become  bankrupt  shortly  after  his        '      

father's  death,  it  was  held  that,  notwithstanding  the 
descent  of  the  mortgaged  estate  to  B.,  the  mortgage 
creditor  was  at  liberty  to  prove  against  B.,  without  giv- 
ing up  the  security,  although  it  was  admitted  that  this 
could  not  have  been  allowed  if  the  descended  estate 
had  been  of  any  value  to  B. 

This  right  of  the  secured  creditor  may  avail  not  only  Marshallino-. 
himself  but  the  owner  of  the  security  he  holds  ;  and 
by  the  equitable  doctrine  of  marshalling  a  joint  creditor 
of  a  firm  *  may  be  entitled  to  prove  against  the  sepa-  [  *718] 
rate  estate  of  one  of  its  members  or  vice  versa,  contrary 
to  the  general  rule. 

For  example,  in  Ex  parte  Salting  (c),  a  firm  wrong-  jrx  parte 
fully  pledged  the  goods  of  a  customer  to  their  bankers  Salting. 
for  an  advance  to  the  firm.  One  of  the  partners  gave 
to  the  bankers  a  separate  guarantee  for  the  advance. 
On  the  bankruptcy  of  the  firm  the  bankers  sold  the 
goods  and  applied  the  proceeds  in  reducing  their  debt. 
They  then  proved  for  the  residue  against  the  separate 
estate  of  the  partner  who  had  given  the  guarantee. 
His  separate  estate  was  more  than  sufficient  to  pay  the 
whole  debt  ;  and  it  was  held  that  the  owner  of  the  goods 
was  entitled  to  have  the  banker's  securities  marshalled, 
and  to  have  the  benefit  of  the  guarantee  to  the  extent 
of  the  value  of  the  goods  which  had  been  sold,  and  to 
prove  for  that  value  against  the  separate  estate  of  the 
partner  who  had  given  the  guarantee. 

The   same   principle  of  eqtiality  amongst   creditors  Eule  that  a 
which  prevents  one  creditor  from  holding   a  security,  creditor  must 
and  proving  for  what  is  due  on  it,  is  also  the  founda-  P™ve  and 
tion  of  the  rule  that   no   creditor   is  allowed  to  sue  a  debtor 
bankrupt  in  respect  of  any  demand  which  may  be  proved 
as  a  debt  under  the  bankruptcy  (d).      But  where  the 
creditor  is  the  creditor  not  only  of   the  bankrupt,  but 
also  of  another  person,  the  creditor  may  prove  against 
the  estate  of  the  former,  and  yet  sue  the  latter,  and 
get  from   him  what  he  can  (e).      Consequently,  if   a 
creditor  of  a  firm,  one  of  the  members  of  which  is  alone 
bankrupt,  is  in  a  position  to   prove  against  his   estate, 


(c)  25  Ch.  D.  148.     See,  also,  Ex  parte  Alston,  4  Ch.  168. 

(d)  46  &  47  Vict.  c.  52,  §'  9  and  %  10,  (2)  ante,  p.  709.  Under 
the  old  law  the  creditor  could  sue  or  prove  at  his  election. 

(e)  See  Ex  parte  Schofield,  12  Ch.  D.  337  ;  Ex  parte  Isaac,  6  Ch. 
58.  See,  as  to  cases  of  suretyship,  Ex  parte  Coplestone,  Mon.  & 
Ch.  262. 


*  27    LAW   OF   PARTNERSHIP. 


786 


BANKRUPTCY. 


Bk.  IV. 
Chap.  4. 
Sect.  4. 


[*719] 

Two  proofs 
for  same 
debt  not 
allowed. 


Interest. 


such  creditor  may  prove  against  it,  and,  at  the  same 
time,  sue  the  solvent  partners  (/),  and  it  is  not  now 
necessary  to  join  the  bankrupt  as  a  co-defendant  (g). 

*  Another  fundamental  principal  relating  to  the  proof 
of  debts,  and  one  which  requires  notice  here,  is  that 
there  can  be  only  one  proof  against  the  same  estate  in 
respect  of  the  same  debt.  Thus,  in  the  common  case 
of  principle  and  surety,  if  the  principle  is  bankrupt, 
and  the  creditor  proves  against  his  estate,  and  receives 
a  dividend,  and  has  recourse  to  the  surety  for  the  dif 
ference,  the  surety  cannot  prove  against  the  bankrupt's 
estate  without  giving  credit  for  the  dividend  already 
paid  to  the  principal  creditor  :  in  other  words  the  divi- 
dend paid  in  respect  of  both  proofs  will  be  no  greater 
than  that  payable  in  respect  of  one  proof  for  the  whole 
amount  of  the  debt  due  by  the  bankrupt  (h).  This 
rule  is  of  considerable  importance  in  mercantile  trans- 
actions, and  is  closely  allied  to  the  rule  which,  as  will 
be  seen  hereafter,  precludes  a  creditor  from  proving  the 
same  debt  against  both  the  joint  and  the  separate  estates 
of  a  bankrupt  firm.  The  rule  forbidding  two  proofs  in 
respect  of  the  same  debt  applies  in  the  winding  up  of 
companies  (i). 

Again,  if  a  person  is  adjudicated  bankrupt  here  and 
abroad,  a  creditor  who  has  proved  abroad  cannot  prove 
here  without  giving  credit  for  what  he  has  received 
under  his  proof  abroad  (k). 

As  regards  interest,  the  Bankruptcy  act,  1883,  sched. 
2,  r.  20,  enacts  as  follows  : — 


20.  On  any  debt  or  sum  certain,  payable  at  a  certain  time  or 
otherwise,  whereon  interest  is  not  reserved  or  agreed  for,  and 
which  is  overdue  at  the  date  of  the  receiving  order  and  provable 
in  bankruptcy,  the  creditor  may  prove  for  interest  at  a  rate  not 
exceeding  four  per  centum  per  annum  to  the  date  of  the  order 
from  the  time  when  the  debt  or  sum  was  payable,  if  the  debt  or 
sum  is  payable  by  virtue  of  a  written   instrument  at  a  certain 

( / )  Ex  parte  Isaac,  6  Ch.  58  :  Keay  r.  Fenwick,  1  C.  P.  D. 
745  ;  Bottomley  v.  Nuttall,  5  C.  B.  N.  S.  122  ;  Heath  v.  Hall,  4 
Taunt.  326  ;  Bovill  r.  Wood,  2  M.  &  S.  22  ;  Harley  v.  Green- 
wood, 5  B.  &  A.  95  ;  Ex  parte  Read,  1  Eose,  460.  Compare  Blan- 
nin  v.  Taylor,  Gow,  N.  P.  199. 

(g)  46  &  47  Vict.  c.  52,  \  114.     See,  previously,  Ex  parte  Isaac, 

6  Ch.  58  ;  Ex  parte  Stanton,  1  M.  D.  &  D.  2715. 

(A)  See  Ex  parte  Came,  3  Ch.  463  ;  Ex  parte  European  Bank, 

7  Ch.  99  ;  Robson,  Bank.  261  et  seq.,  ed.  3. 

(i)  Ex  parte  European  Bank.  7  Ch.  99,  reversing  S.  C,  12  Eq. 
501. 

(k)  Ex  parte  Wilson,  7Ch.  490  ;  Banco  de  Portugal  v.  Waddell, 
5  App.  Ca.  161  ;  Selkrig  v.  Davies,  2  Dow,  230. 


PROOF  OF  DEBTS SECURED  CREDITORS.  787 

time,  and  if  parable  otherwise,  then  from  the  time  when  a  de-  Bk.  IY. 
mand  in  writing  has  been  made  giving  the  debtor  notice  that  Chap.  4. 

interest  will  be  claimed  from  the  date  of  the  demand  until  the  >Tec  '     

time  of  payment  (I). 

A  jury  may  allow  interest  where  it  is  payable  by 
agreement,  or  by  mercantile  usage  ;  also  (by  3  &4  "VVm. 
4,  c.  42),  where  a  *  sum  certain  is  payable  under  a  [  *  720] 
written  instrument  at  a  certain  time  and  where  payment 
of  a  sum  certain,  not  so  payable,  has  been  demanded  by 
notice  in  writing  stating  that  interest  will  be  claimed  (m). 

Interest  at  4  per  cent,  is  payable  on  all  proved  debts 
from  the  date  of  the  receiving  order  if  the  estate  is 
more  than  sufficient  to  pay  all  proved  demands  upon 
it  (n). 

Having  adverted  to  the  proof  and  payment  of  debts 
generally,  it  is  proposed  to  pass  to  the  subject  of  the 
proof  and  payment  of  the  debts  of  partners,  first,  out  of 
their  joint,  and  next,  out  of  their  respective  separate 
assets. 

A.  Proof  against  the  joint  estate. 

The  administration  of  the  joint  estate  will  be  best  Admin istra- 
explained  by  examining  : —  tion  of 

1.  The  rights  of  the  joint  creditors,  partner's 

2.  The  rights  of  the  partners,  Jomt  estate' 

3.  The  rights  of  their  separate  creditors, 
as  against  that  estate. 

First,  with  respect  to  the  joint  creditors. 

The  joint  creditors  have  the  first  claim  for  payment  i.  Position 
out  of  the  joint  estate  (o):  and  until  they  have  been  of  the  joint 
paid  all  the  principal  monies  due  to  them,  with  interest  creditors, 
thereon  (p)  up  to  the  date  of  the  receiving  order  (q) 
(if  their  debts  carry  interest),  no  other  person  is  enti- 
tled to  receive  a  farthing  out  of  the  assets  of  the  firm  (r). 

(1)  See  Ex  parte  Bath,  27  Ch.  D.  509  ;  Ex  parte  Bishop,  15  Ch. 
D.  421. 

(m)  See  3  Chitty's  Statutes,  584,  ed.  4. 

(n)  See  46  &  47  Vict.  c.  52.  §  40  (5).  See,  as  to  appropriating 
securities  to  interest,  Be  Savin,  7  Ch.  760. 

(o)  Ante,  p.  692.     As  to  marshalling,  see  ante,  p.  717. 

(p)  Ex  parte  Ogle,  Mont.  350  ;  Pearce  v.  Slocombe,  3  Y.  &  C. 
Ex.  84  ;  Ex  parte  Reeve,  9  Ves.  590,  and  see  Ex  parte  Woodford. 
3  De  G.  &  S.  666. 

(q)  Interest  after  that  date  is  not  payable  in  priority  to  the 
separate  creditors,  Ex  parte  Findlay,  17  Ch.  D.  334. 

(r)  The  expenses  of  getting  in  joint  estate  must  of  course  be 
paid  out  of  it;  Ex  parte  Rutherford,  1  Rose,  201. 


788 


BANKRUPTCY. 


Bk.  IV. 
Chap.  4. 
Sect.  4. 

[  *  721] 


2.  Position 
of  the 
partners. 


Ex  parte 
Sillitoe. 


[*722] 


If  a  person  is  truly  a  creditor  of  the  firm,  he  is  not  de- 
prived of  his  right  to  rank  as  a  joint  creditor,  merely 
*  because  he  may  have  some  separate  security  for  his 
debt  (s);  for  he  is  treated,  in  such  a  case,  as  a  joint 
creditor  having  the  advantage  of  a  collateral  security  (t). 
But  it  must  not  be  forgotten,  that  a  person  who  ad- 
vances money  to  one  partner,  on  his  separate  security, 
and  makes  him  alone  the  debtor,  has  no  locus  standi 
against  the  firm  merely  because  the  money  is  after- 
wards applied  to  its  use  (u). 

Secondly,  with  respect  to  the  partners. 

Subject  to  the  exceptions  which  will  be  hereafter 
stated,  it  is  an  established  rule  that  a  partner  in  a  bank- 
rupt firm  shall  not  prove  in  competition  with  the  cred- 
itors of  the  firm.  They  are,  in  fact,  his  own  creditors, 
and  he  cannot  be  permitted  to  diminish  the  partnership 
assets  to  the  prejudice  of  those  who  are  not  only  cred- 
itors of  the  firm,  but  also  of  himself  (a?).  If,-  there- 
fore, a  partner  is  a  creditor  of  the  firm,  neither  he  nor 
his  separate  creditors  (for  they  are  in  no  better  posi- 
tion than  himself)  can  compete  with  the  joint  creditors 
as  against  the  joint  estate.  Lord  Hardwicke,  it  is  true, 
in  Ex  parte  Hunter  (y),  allowed  this  to  be  done;  but 
that  case  has  not,  in  this  respect,  been  followed,  and  has 
long  been  considered  as  overruled  (z). 

In  Ex  parte  Sillitoe  (a),  a  leading  case  on  this  sub- 
ject, two  partners  in  a  banking  firm  carried  on  a  sepa- 
rate business  as  ironmongers,  and  became  creditors  of 
the  bank  to  a  large  amount,  in  consequence  of  having, 
with  a  view  to  enable  the  bank  the  better  to  obtain 
money,  discounted  their  securities.  *  The  banking 
firm  was  adjudged  bankrupt,  and  an  attempt  was  made 

(s)  See  Ex  parte  Brown,  cited  1  Atk.  225 ;  Ex  parte  Clowes,  2 
Bro.  C.  C.  595;  Ex  parte  Harman,  2  Gl.  &  J.  25. 

(t)  See  Ex  parte  Hunter,  1  Atk.  227  ;  Ex  parte  Harman,  2  Gl. 
&  J.  25,  and  ante,  p.  715. 

(u)  Ex  parte  Hunter,  1  Atk.  223;  Ex  parte  Emly,  1  Rose,  65; 
Lloyd  v.  Freshfield,  9  D.  &  Ry.  19;  and  see  ante,  pp.  189  et  seq. 
and  703. 

(x)  See  Ex  parte  Sillitoe,  1  Gl.  &  J.  382.  Ex  parte  HaTgreaves, 
1  Cox,  441;  Ex  parte  Reeve,  9  Ves.  590;  Ex  parte  Rawson.  Jac. 
279.  See  Ex  parte  Gliddon,  13  Q.  B.  D.  43,  noticed  hereafter, 
where  two  firms  were  curiously  intermixed. 

(//)  Cooke's  Bank.  Law,  52o\  ed.  8,  and  1  Atk.  223. 

(z)  Ex  parte  Burrell ;  Ex  parte  Parker;  Ex  parte  Pine,  all  cited 
in  Cooke's  Bank.  Law,  528,  ed.  8,  and  see  per  Ld.  Eldon,  Ex 
parte  Harris,  1  Rose,  438. 

(a)  1  Gl.  &  J.  382.  Ex  parte  Williams,  3  M.  D.  &  D.  433,  was 
a  similar  case.  See,  also,  Ex  parte  Maude,  2  Ch.  550;  and  infra, 
p.  727. 


PROOF  AGAINST  JOINT  ESTATE.  7S9 

on  behalf  of  the    ironmongery  firm,  to  prove,  as  joint  Bk.  IV. 
creditors,  against  the  joint  estate  of  the  bank.     Lord  £*hap.  4. 

Eldon,  overruling  the  decision  of  the  Vice- Chancellor,  ^ect'  J 

rejected  the  proof    upon  the  ground  which  is  stated 
above. 

So  in  the  previous  case  of  Ex  parte  Hargreaves  (6),  £x  parte 
alias  Shakesliaft,  Stirrup,  and  Salisbury,  three  persons  Hargreaves. 
were  partners  as  cotton  manufacturers,  and  two  of  them 
were  also  partners  as  linen  drapers;  goods,  manufac- 
tured by  the  three,  were  consigned  to  the  two  for  sale, 
for  the  benefit  of  the  larger  firm,  and  bills  were  drawn 
on  the  two,  on  behalf  of  the  three;  both  firms  became 
bankrupt,  and  the  larger  firm  was  indebted  to  the 
smaller  in  respect  to  the  above  transactions.  It  was 
held,  that  the  members  of  the  smaller  firm  being  liable 
to  the  debts  of  the  larger  firm,  the  assignees  of  the 
former  could  not  compete  with  the  joint  creditors  of  the 
latter. 

Again,  as  the  estate  of  a  deceased  partner  is  liable  to  Executors  of 
the  debts  of  the  firm  (c),  it  follows  that,  so  long  as  such  a  deceased 
liability  exists,  his  executors  cannot  prove  agaiDst  the  Partuel- 
joint  estate  of  the  surviving  partners  for  the  amount 
due  from  them  to  his  estate  (d).     But  if  those  debts  are 
paid,  or  the  estate  of   the  deceased  is  relieved    from 
them  (e),  such  proof  is  admissible  (/);  except  in  respect 
of  assets,  properly  brought  into  or  left  in  the  business 
by  the  executors  as  part  of  the  capital  of  the  deceased. 
No  proof,  however,  in  respect  of  such  assets  is  admissi- 
ble against  the  joint  estate  of  the  surviving  partners, 
unless  all  their  joint  debts  contracted  as  well  before  as 
after  the  death  of  the  deceased  are  paid.     The  leading 
case  on  this  subject  is  Ex  parte  Butterfield  (g).     In  Ex  parte 
that  case  a   sole  trader  *  directed   by  his  will   that  it  Butterfield. 
* [*723J 

(b)  1  Cox,  440,  and  1  Gl.  &  J.  382,  and  11  Ves.  414,  infra,  p. 
726. 

(c)  Ante,  pp.  194.  595. 

(d)  Ex  parte  Blythe,  16  Ch.  D.  620;  Nanson  v.  Gordon,  1  App. 
Ca.  195.  affirming  Ex  parte  Gordon,  10  Ch.  160. 

(e)  Exparte  Andrews,  25  Cb:  D.  505,  shows  that  the  outstand- 
ing joint  liabilities  need  not  be  paid.  It  is  enough  if  there  is 
no  proof  in  respect  of  any  of  them.  But  note,  there  was  in  that 
case  no  reason  to  suppose  they  ever  would  be  proved.  See.  also, 
p.  738,  note  (g). 

(/)  Ex  parte  Edmonds,  4  De  G.  F.  &  j.  488,  noticed  infra,  p. 
723. 

iff)  De  Gex,  570;  Ex  parte  Corbridge,  4  Ch.  D.  246.  was  decided 
on  the  same  principle.  See,  too,  Ex  parte  Garland,  10  Yes.  110, 
where  proof  in  respect  of  assets  improperly  employed  was  ad- 
mitted, and  proof  in  respect  of  assets  properly  employed  was  re- 
jected. See,  also,  Scott  v.  Izon,  34  Beav.  434;  Ex  parte  Thomp- 
son, 2  M.  D.  &  D.  761,  and  compare  the  cases  in  the  next  note. 


790  BANKRUPTCY. 

Bk.  IV.  should  be  lawful  for  his  widow  to  employ  60001.  in  con- 

Chap.  4.  Sect,  tinuing  his  business,  and  he  appointed  her  and  his  son 

*    executors.     After  the  testator's  death,  his  widow  and 

son  continued  his  business  with  his  assets,  and  became 
bankrupt.  The  persons  beneficially  interested  in  the 
assets  which  had  been  employed  by  the  bankrupts,  sought 
to  prove,  in  respect  thereof,  against  their  joint  estate; 
but  it  was  held  that,  to  the  extent  of  6000Z.,  no  such 
proof  could  be  allowed,  for  the  employment  of  6000?. 
being  authorised  by  the  will,  the  proof  could  not  be  ad- 
mitted, without,  in  substance,  infringing  the  rule  which 
precludes  a  partner  from  competing  with  his  own 
creditors. 
Ex  parte  This  case  may  be  usefully  compared  with  Ex  parte 

Edmonds.  Edmonds  (h).  There,  partnership  articles  provided  in 
effect  that  if  one  of  the  partners  died,  so  much  of  his 
share  in  the  capital,  as  should  not  exceed  100,000?., 
should  be  continued  in  and  be  considered  as  part  of 
the  partnership  effects;  that  the  survivors  should  pay 
off  the  amount  of  the  deceased's  share  by  instalments, 
with  interest,  but  that  his  estate  should  not  share  in 
the  profits  accruing  after  his  death.  The  partner  in 
question  having  died,  more  than  150,000?.  was  found 
due  to  him  froin  the  partnership.  His  executors  took 
a  bond  for  this  amount  from  the  surviving  partners, 
who  afterwards  became  bankrupt,  having,  however, 
previously  paid  all  the  debts  for  which  they  and  the 
deceased  were  jointly  liable  (i).  It  was  held  that  the 
executors  were  entitled  to  prove  against  the  joint  es- 
tate of  the  surviving  partners  for  the  whole  amount  of 
the  bond,  and  not  only  for  the  excess  over  100,000Z.,  as 
the  other  joint  creditors  contended.  The  provisions  of 
the  deed  taken  together  showed  plainly  that  the  100,- 
000/.,  was  intended  to  be  continued  in  the  concern  in 
the  sense  of  a  loan  bearing  interest;  and  that  although 
r  *  724]  the  money  was  to  be  employed  in  *  the  business  of  the 
partnership,  it  was  to  be  so  employed,  not  as  the  money 
of  the  deceased,  but  as  the  money  of  the  surviving 
partners,  borrowed  by  them  from  his  estate. 
Assets  im-  Assets  of  a  deceased  partner  brought  into  the  busi- 

properly  ness  by  his  executor  in  breach  of  trust,  do  not  form 
brought  into  „ar^  0f  ^ue  i0int  estate  of  the  surviving  partners,  and 
the  business.  r  J  &    r 

(h)  4  De  G.  F.  &  J.  488.  See,  also,  Ex  parte  Hill.  3  M.  &  A. 
17"),  and  Ex  parte  Crofts,  2  Deac.  102,  where  trust  money  lent  to 
partners  was  held  to  be  provable  as  a  joint  debt. 

(0  The  payment  of  the  debts  to  which  the  estate  of  the  de- 
ceased was  liable  distinguishes  this  from  Ex  parte  Gordon,  10 
Ch.  160. 


PROOF  AGAINST  JOINT  ESTATE.  791 

may  be  the  subject  of  proof  against  that  estate, not  only  in  Bk.  IV. 
competition  with  those  creditors  who  have  become  such  CnaP-  4- Sect- 

since  the  death  of  the  deceased,  but  also    in  competi- . 

tion  with  those  whose  debts  accrued  in  his  lifetime  (A;); 
as  regards  the  last,  the  proof  is  exceptional,  but  is  al- 
lowed for  the  same  reason  as  similar  proof  is  allow- 
ed where  separate  estate  of  a  partner  has  been  fraud- 
ulently dealt  with  as  property  of  the  firm  (I). 

Another  instructive  case,  illustrating  the  rule  now  Two  firms 
under  consideration  is  afforded  by  Ex  parte  Broivn  (m).  with  common 
There,  in  substance  there  were  two  firms,  with  a  com-  partner, 
mon  partner,  viz.,  A.  and  B.,  and  A.  and  OL:    C.  had  ^x  parte 
made   himself   separately  liable  for  a  debt  owing  by  Brown- 
A.  and  B. ;  both  firms  became  bankrupt.     The  princi- 
pal creditor  proved   against  C.'s   separate  estate,  and 
received  a  dividend.     A  claim  was  then   made  on  be- 
half of  C.'s   separate  estate,  to  prove  for  the  amount 
thus  paid  out  of  it  against  the  joint  estate  of  A.  and  B. 
But  it  was  held  that  this  proof  could  not  be  allowed, 
for  the  principal  creditor  not  having  been  paid  in  full, 
he  had  a  right  of  pi*oof  against  the  joint  estate  of  A. 
and  B.,  and  that,  consequently,  C.  could  not  diminish 
that  estate  to  his  prejudice. 

There    are,  however,  three  exceptions   to  the  rule  Exceptions 
above  stated,  viz. :  to  rule  that 

1 .  Where  the  separate  property  of  one  partner  has  partner  can- 
been  fraudulently  dealt  with  as  the  property  of  the  n°t  compete 
«r     .  .  with  his  own 

'  creditors. 

2.  V\  here  there  are  two  distinct  trades,  carried  on 
by  the  firm,  and  by  one  or  more  of  the  members  of  it, 
with  distinct  capitals; 

*3.   Where  a  partner  has  obtained  his  order  of  dis-  [  *725] 
charge,   or    has   been  otherwise  discharged  from  the 
joint  debts,  and  has  afterwards  become  a  creditor  of 
the  firm  (n). 

This  last  exception  rests  on  the  principle  that  the 
discharged  partner  is  no  longer  a  debtor  to  the  credit- 
ors of  the  firm,  and  does  not,  therefore  fall  within  the 

(k)  Ex  parte  Garland,  10  Ves.  110;  Ex  parte  Westcott,  9  Ch. 
626.     See  ante,  c.  3,  \  2. 

(/)  See  infra;  assets  of  the  testator  in  the  business  when  he 
died,  and  improperly  left  in  it,  cannot,  it  is  conceived,  be  the 
subject  of  proof,  unless  the  debts  of  the  firm  contracted  in  his 
life  are  paid. 

(m)  2  M.  D.  &  D.  718.     See,  too,  Ex  parte  Rawson,  Jac.  274. 

(»)  Ex  parte  Smith.  14  Q.  P,.  D.  394,  where  the  estate  of  the 
deceased  partner  was  discharged  by  the  Statute  of  Limitations  ; 
Ex  parte  Atkins,  Duck,  479,  where  a  partner  who  had  obtained 
his  certificate  took  up  bills  of  the  firm. 


792 


BANKRUPTCY. 


Bk.  IV. 
Chap.  4. 
Sect.  4. 


Exception  in 
the  case  of 
fraud. 


Exception  in 
the  case  of 
distinct 
trades. 


[  *  726] 

Case  where 
one  firm 
contains  the 
other. 


rule  which  precludes  a  person  from  compoting  with 
his  owd  creditors.  The  two  first  exceptions  are  not  so 
easily  explained. 

Exception  in  the  case  of  fraud. — If  separate  property 
of  one  partner  has  been  fraudulently  converted  by  his 
co-partners  to  the  use  of  the  firm,  such  property  must 
be  treated  as  the  separate  estate  of  the  defrauded  part- 
ner ;  and  proof  on  his  behalf  (or  rather  on  behalf  of 
his  separate  estate)  is  therefore  allowed  in  respect  of 
such  property,  against  the  joint  estate,  and  in  compe- 
tition with  the  joint  creditors  (o).  Upon  precisely  the 
same  principle,  if  a  partner  has  fraudulently  converted 
property  of  the  firm  to  his  own  use,  proof  on  behalf  of 
the  joint  estate  is  allowed,  in  respect  of  such  property, 
against  his  separate  estate,  and  in  competition  with  his 
separate  creditors  (p).  This,  however,  is  a  subject 
which  will  have  to  be  considered  hereafter. 

Exception  in  the  case  of  distinct  trades. — If  one  of 
two  firms,  carrying  on  distinct  trades,  becomes  creditor 
of  the  other  in  the  ordinary  way  of  their  trade,  the 
creditor  firm  may  prove  against  the  joint  estate  of  the 
debtor  firm,  in  competition  with  its  other  joint  credit- 
ors, although  one  or  more  persons  may  be  partners  in 
both  firms   (q). 

If  neither  firm  contains  the  other,  e.  g.,  if  one  firm  is 
A.  and  B.,  and  the  other  firm  is  A.  and  C,  either  may 
rank  as  a  joint  *  creditor  of  the  other,  because  the  cred- 
itors of  the  one  are  not  creditors  of  the  other(r). 

If  one  of  the  firms  contains  the  other,  e.  g.,  if  one 
firm  is  A.,  B.,  and  C,  and  the  other  is  A.  and  B.,  or  A. 
only,  two  cases  have  to  be  considered,  according  as  the 
larger  or  the  smaller  firm  is  the  debtor  to  the  other  ; 
for  whilst  all  persons  who  are  creditors  of  the  larger 
firm  are  creditors  of  the  smaller,  the  converse  is  evi- 
dently not  true.  Consequently,  although  the  larger 
firm  does  not  compete  with  its  own  creditors  if  it  proves 
against  the  joint  estate  of  the  smaller  firm,  the  smaller 
firm  must  necessarily  compete  with  its  own  creditors  if 
it  is  allowed  to  rank  as  a  joint  creditor  against  the  es- 
tate of  the  larger  firm.  Hence,  although  it  was  long 
ago  decided  that  proof  might  be  made  by  the  larger  firm 

(o)  Seo  per  Lord  Eldon  in  Ex  parte  Sillitoe,  1  Gl.  &  J.  383, 
and  in  Ex  parte  Harris,  1  Rose,  437. 

{pj  Ex  parte  Lodge  and  Fendal,  1  Ves,  J.  166,  infra,  p.  735. 

( q)  See"  in  addition  to  the  cases  cited  below,  Ex  parte  Ring, 
Ex  parte  Freeman,  Ex  parte  Johns,  cited  in  Cooke's  Bank.  Law, 
534,  ed.  8.  Compare  Ex  parte  Gliddou,  13  Q.  B.  P,  43,  where 
no  debt  was  contracted. 

(r)  Ex  parte  Thompson,  3  Deac  &  Ch.  613 


PROOF  AGAINST  JOINT  ESTATE.  793 

against  the  smaller  (s),  it  was  also  decided  that  proof  Bk.  IV. 
could  not  be  made  by  the  smaller  against  the  larger  (t).  q  *?*■,*" 
However,  it  seems  now  settled  that  if  the  two  trades        ' 


are  distinct,  and  if  the  larger  firm  has  become  indebted 
to  the  smaller  in  the  regular  way  of  their  trades  (u), 
the  smaller  firm  may  prove,  like  any  other  joint  creditor, 
against  the  j^int  estate  of  the  larger.  This  was  decid- 
ed in  Ex  parte  Cook  (x),  where  one  partner,  who  carried  Ex  parte 
on  a  separate  business,  was  allowed  to  rank  as  a  joint  Cook, 
creditor  against  the  joint  estate  of  the  firm  of  which  he 
was  a  member,  and  which  had  become  indebted  to  him 
in  the  ordinary  way  of  their  and  his  respective  trades. 

The  exception  now  under  discussion  is,  however,  only  The  trades 
allowed  provided  two  things  concur,  viz. :  first,  there  must  be 

must  be  two  distinct  trades  ;  and  secondly,  the  debt  ivstii><J'  ancl 

.  the  debts 

sought  to  be  proved  must  have  arisen  from  dealings  lia     been 

between  trade  and  trade  in  the  ordinary  way  of  busi-  contracted 
ness.     It  was  because  the  two  firms  were,  in  fact,  one,  in  the 
the  smaller  one  being  only  a  branch  of  the  larger,  and  orfhnaiT 
carrying  on  its  business,  that  proof  was  disallowed  in  tjlelll 
Ex  parte  Hargreaves  (y),  and  it  was  because,  although 
the  two  *  firms  and  their  trades  were  distinct,  the  debt  [      t2i\ 
sought  to  be  proved  had  not  arisen  in  the  ordinary  way 
of  trade  that  proof  was  disallowed  in  Ex  parte  Silli- 
toe  (z)   and  in  Ex  parte   Williams  (a).     In  this  last  Ex  parte 
case  there  was  a  firm  of  iron-masters  ;  two  of  the  firm  ^  illiams. 
were  also  bankers  :  the  iron  firm  was  indebted  to  the 
banking  firm  for  advances,  but  proof  in  respect  of  them 
on  behalf  of  the  banking  firm  against  the  joint  estate 
of  the  iron  firm  was  disallowed,  inasmuch  as  the  cir- 
cumstances under  which  the  debt  was  contracted  pre- 
cluded the  idea  that  the  bankers  had  made  the  advances 
in  the  ordinary  way  of  their  business  as  bankers. 

Even  in  these  excepted  cases,  however,  proof  by  one 
partner  is  not  allowed  unless  on  taking  the  partnership 
accounts  a  balance  still  remains  due  to  him  (6). 

The  rule  which  precludes  one  partner  from  proving  Come  where 

against  the  estates  of  his  co-partners  does  not  apply  to  partnership 

persons  who  have  not  become  partners,  and  who  have  has  no* 

* commenced. 

{.<*)  Ex  parte  St.  Barbe,  11  Ves.  413;  Ex  parte  Castell,  2  Gl.  & 
J.  124  ;  Exparte  Hesham,  1  Rose,  146. 

(i)  Ex  parte  Hargreaves,  1  Cox.  440 :  Ex  parte  Adams,  1  Kose, 
305;  Ex  parte  Sillitoe,  1  Gl.  &  Jam.  382. 

(u)  This  is  essential,  see  infra. 

(x)  Mont.  228. 

(y)  1  Cox.  440.     See  ante,  p.  722. 

(z)  1  Gl.  &  J.  382.     See  ante,  p.  721. 

{a)  3  M.  D.  &  D.  433.     See,  also,  Ex  parte  Maude,  2  Ch.  550. 

(b)Ex  parte  Maude,  2  Ch.  550, 


794 


BANKRUPTCY. 


Bk.  IV. 
Chap.  4. 
Sect.  4. 


Ex  parte 
Turquand. 


[  *  728] 

3.  Position 
of  separate 
creditors. 


not  rendered  themselves  liable  to  third  parties  as  if 
they  were  partners.  This  is  well  illustrated  by  Ex  parte 
.  Turquand  (c).  There,  in  substance,  A.  agreed  to  be- 
come a  partner  with  B.  and  C,  who  were  already  in 
partnership  together,  and  who  carried  on  business  in 
the  names  of  B.  and  C.  It  was  agreed  that  A.  should 
bring  in  2000Z.,  and  that  the  name  of  the  firm  should  be 
altered  to  B.,  C.  &  Co,  A.  advanced  2000Z.  to  B.  and 
C. ;  the  name  of  the  firm  was  altered  as  arranged,  but 
no  articles  of  partnership  were  ever  signed,  and  A.  re- 
fused to  sign  any  or  to  do  anything  more  before  he  was 
satisfied  as  to  B.  and  C.'s  solvency.  There  was  no 
evidence  to  show  that  A.  had  made  himself  liable  to 
third  parties  as  if  he  were  a  partner  ;  and  B.  and  C. 
having  become  bankrupt,  A.  was  allowed  to  prove  against 
their  estate  for  the  advances  he  had  made  them. 

*   Thirdly,  with  respect  to  the  separate  creditors. 

The  principle  which  prohibits  a  partner  from  com- 
peting with  the  joint  creditors  of  the  firm  evidently  has 
no  application  as  between  one  partner  and  the  separate 
creditors  of  his  co-partners.  Moreover,  the  lien  which 
each  partner  has  upon  the  assets  of  the  firm  must  be 
satisfied  before  any  part  of  the  joint  estate  can  be 
divided  amongst  the  members  of  the  firm,  or,  which 
comes  to  the  same  thing,  be  carried  to  the  account  of 
their  respective  separate  estates.  Therefore,  after  the 
joint  debts  of  the  tirm  have  been  paid,  with  interest  to 
the  date  of  the  receiving  order  (d),  the  surplus  of  the 
joint  estate  must  be  next  applied  in  satisfaction  of  the 
liens  of  the  individual  partners  upon  it  (e);  and  it  is 
the  ultimate  surplus  only  which  is  to  be  divided  amongst 
the  partners,  or  their  respective  separate  estates,  in 
proportion  to  their  respective  shares  in  the  assets  of  the 
firm.  It  is  hardly  necessary  to  observe  that  a  lien  exist- 
ing in  favour  of  one  partner  increases  his  separate 
estate,  and  confers  upon  his  separate  creditors  a  right 
to  prove  against  the  joint  estate  in  preference  to  the 
separate  creditors  of  the  other  partners,  who  have  no 
such  lien  (/).     If  the  joint  estate  is  not  sufficient  to 

(c)  2  M.  D.  &  IX  339.  See,  also,  Ex  parte  Davis,  4  De  G.  J.  & 
S.  523,  ante,  p.  21.  Ex  parte  Hickin,  3  De  G.  &  S.  662,  shows 
that  a  person  intending  to  become  a  partner,  may  prove  as  a 
creditor  for  arrears  of  salarv. 

(d)  Ex  parte  Findlay,  17  Ch.  D.  334. 

(e)  Ex  parte  King,  17  Ves.  115,  and  1  Rose,  212  ;  Ex  parte 
Reid,  2  Rose,  84  ;  Ex  parte  Reeve,  9  Ves.  588  ;  Ex  parte  Terrell, 
Buck,  345  ;  Fereday  v.  Wightwick,  Taml.  250 ;  Holderness  v. 
Shackels,  8  B.  &  C.  612. 

(/)  Ex  parte  King,  17  Ves.  115  ;  Ex  parte  Reid,  2  Rose,  84. 


PROOF  AGAINST  JOINT  ESTATE.  795 

satisfy  the  lien,  the  deficiency  becomes  provable  against  Bk.  IV. 
the  separate  estates  of  the  indebted  partners  (g).  Chap.  4.  Sect. 

The  joint  debts  being  paid,  and  the  liens  of    the  in-  . ' . 

dividual  partners  on  the  partnership  assets  being  satis-  Surplus  of 
tied,  the  surplus   of  the  joint  estate  becomes  divisible  Joint  estate, 
amongst  the  respective  separate  estates  of  the  partners 
in  proportion  to  their  respective  shares  in  the   partner- 
ship property.     The  surplus  of  the  joint  estate,  having 
been  distributed,  loses  its  character  of  joint  estate,  and 
becomes,  to  all  intents  and  purposes,  separate  estate  of  the 
partners  to  whose  credit   it  is  carried.      If  any  joint 
*  estate  is  carried  to  a  separate  estate  before  the   joint  [     729] 
debts  are  paid  and  the  partners'  liens  are  satisfied,  such 
joint  estate  will  be  ordered  to  be  restored  (h). 

B. — Proof  against  the  separate  estates. 

The  principles  according  to  which  the  separate  es-  Administra- 
tate  of  one  partner  is  administered,  in  the  event  of  an  tlon  ot 
adjudication  against  him  alone,  are  the  same  as  those  estate  of 
which  govern  the  administration  of  the  separate  estates  partners. 
of  the  members  of  a  bankrupt  firm  (i).     The  leading 
principle  in  administering  a  separate  estate  is  to  pre- 
fer separate  to  joint  creditors,  just  as  in  administering 
joint  estate  the  leading  principle  is  to  prefer  joint  to 
separate  creditors.     But  there  is  this  important  differ- 
ence to  be  borne  in  mind;  the  separate  creditors  of  one 
partner  are  not  creditors  of  the  firm,  whilst  the  joint 
creditors  of  the  firm  are  creditors  of  each  of  the  part- 
ners composing  it.     For  this  reason  it  was   formerly 
the  rule  to  distribute  the  separate  estate  of  each  part- 
ner, jwi  passu,  amongst  his  creditors,  whether  joint  or 
separate  (k)\  and  although  this  rule  has  been  depart- 
ed from  (I),  the  distinction  in  question  naturally  leads 
to  important  consequences,  as  will  be  seen  hereafter. 

(g)  Ex  parte  Terrell.  Buck,  345  ;  Ex  parte  King,  17  Ves.  115; 
Ex  parte  Watson,  Buck,  449,  and  4  Madd.  477  ;  and  see,  as  to 
the  last  case,  2  Gl.  &  J.  172. 

(//)  See  Ex  parte  Lanfear,  1  Rose,  442. 

(i)  46  &  47  Vict.  c.  52,  \  40  (3),  and  \  59.  and  Bank.  Rules, 
1886,  r.  269.  Ex  parte  Taitt,  16  Ves.  197;  Everett  v.  Backhouse, 
10  Ves.  98. 

{k)  Ex  parte  Blake,  Cooke's  Bank.  Law,  528,  ed.  H-  Ex  parte 
Cobham  ;  Ex  parte  Haydon  ;  Ex  parte  Caruthers  ;  Ex  parte  Up- 
ton ;  Stephens  v.  Brown,  and  Mathews  v.  Aland,  all  cited  in 
Cooke's  Bank.  Law.  260-264,  ed.  8;  and  see  Lord  Craven  r. 
Widdows,  Ca.  in  Ch.  139;  Ex  parte  Copland,  1  Cox,  420;  Ex  parte 
Hodgson,  2  Bro.  C.  C.  5;  Ex  parte  Page,  ib.  119;  Ex  parte  Plin- 
tum,  ib.  120. 

(1)  See  next  note,  and  Ex  parte  Baudier,  1  Atk.  98;  Ex  parte 
Olknow,  Cooke's  Bank.  Law,  259,  ed.  8. 


796  BANKRUPTCY. 

Bk.  IV.  The  administration  of  the  separate  estates  of  bank- 
Chap.  4.  beet.  rUpt  partners,  and  the  administration  of  the  separate 
estate  of  one  bankrupt  partner,  if  one  alone  is  bank- 
rupt, will  be  best  explained  by  examining 

1.  The  rights  of  the  separate  creditors, 

2.  The  rights  of  the  joint  creditors, 

3.  The  rights  of  the  partners, 
as  against  such  estates  or  estate. 

[  *  730]  *  First,  with  respect  to  the  separate  creditors. 

1.  Position  Except  in  those  cases  which  will  be  specially  noticed 

of  separate  hereafter,  the  separate  estate  of  each  partner  is  to  be 
creditors.  £rg^.  app]je^  jn  payment  of  his  separate  creditors  (wi), 
to  the  extent  of  20s.  in  the  pound  on  their  provable 
debts  with  interest  up  to  the  date  of  the  receiving  or- 
der; but  not  with  interest  after  that  date  until  the  joint 
creditors  have  also  received  20s.  in  the  pound  on  tbeir 
provable  debts  (n). 

A  bankrupt's  wife  who  had  lent  him  money  for  the 
purpose  of  his  business  cannot  compete  with  his  other 
creditors  (45  &  46  Vict.  c.  75,  §  3).  But  this  enact- 
ment does  not  preclude  the  wife  of  a  partner  from 
proving  against  tbe  joint  estate  of  the  firm  in  respect 
of  a  loan  to  her  husband  and  his  co-partners  jointly  (oo). 
After  payment  of  the  separate  creditors  of  each  part- 
ner, the  surplus  of  his  separate  estate  is  carried  to  the 
credit  of  the  joint  estate  (o);  and  if-  the  partner  is  a 
member  of  several  bankrupt  firms,  the  surplus  of  his 
separate  estate  must  be  divided  amongst  their  respec- 
tive joint  estates,  in  proportion  to  the  amount  of  the 
debts  proved  against  them  respectively  (p). 

(m)  46  &  47  Viet.  c.  52.  \\  40  (3)  and  59,  and  Bank.  Rules, 
1886,  r.  269;  Ex  parte  Elton,  3  Ves.  238:  Ex  parte  Abell,  4  Ves. 
837;  Ex  parte  Clay,  6  Ves.  813;  Ex  parte  Taitt,  16  Ves.  193.  As 
to  marshalling,  see  ante,  p.  717. 

(n)  46  &  47  Vict.  c.  52,  \  40,  cl.  5,  and  Sehed.  2,  r.  20,  and  Ex 
parte  Findlay,  17  Ch.  D.  334.  Under  the  old  law  the  separate 
creditors  were  not  entitled  to  interest  until  the  joint  creditors 
had  received  20*.  in  the  pound  on  their  principal  debts,  see  inter 
alia,  Ex  parte  Wood,  2  Mont.  D.  &  D.  283;  Ex  parte  Clarke,  4 
Ves.  677;  Ex  parte  Boardman,  1  Cox,  275;  Ex  parte  Minchin,  2 
Gl.  &  Jam.  287. 

(oo)   Exparte  Nottingham,  19  Q.  B.  D.  88. 

(o)  Exparte  Wood,  2  M.  D.  &  D.  2*3,  where  the  surplus  of  the 
separate  estate  of  a  bankrupt  shareholder  in  a  company  being 
•wound  up  in  equity  was  held  applicable  to  the  payment  of  the 
creditors  of  the  company,  and  not  payable  into  court  in  the  suit. 

(/>)  Ex  parte  Frauklyn,  Buck,  332,  where  the  order  is  given  at 
length. 


PROOF  AGAINST  SEPARATE  ESTATES.  797 

Secondly,  villi  respect  to  the  joint  creditors. 

Except  in   the  cases  hereafter  mentioned,  the  joint  Bk.  IV. 
creditors  *  of  partners  (q)  are  not  entitled  to  payment  Chap.  4.  Sect. 

out  of  their  separate  estates,  in  competition  with  their  _ 

separate  creditors  (r).     This  is  in  accordance  with  the  [  *  731] 
old  law  (s).      The  Bankruptcy  Act,  1883,  mentions  no  2.  Position  of 
exceptions,  and  it  has  not  yet  been  decided  that  there  Joi^ 
are  any;  and  owing  to  the  language  of  §  59  (1)   it  is  ^re  l  ors" 
doubtful  whether  they  exist  in  cases  where  one  partner  whici1  thev 
only  is  bankrupt.      But  it  would  be  strange  if  the  ex-  may  compete 
ceptions  existed  (and  it  is  apprehended  that  the  first  with  the 
three  do  exist)  where  a  separate  estate  is  administered  seP»rate 
under  a  joint  adjudication  against  a  firm,  and  not  where  Clet  1  °1=" 
the  separate  property  of  one   partner  is   administered 
under  an  adjudication  against  himself  alone  (/). 

The  exceptions  are  four  in  number.  The  first  exists 
where  there  is  no  joint  estate;  the  2nd  where  the  prop- 
erty of  the  firm  has  been  fraudulently  converted;  the 
3rd  where  there  has  been  a  distinct  separate  trade,  in 
respect  of  which  a  separate  debt  has  been  contracted; 
the  4th  is  in  favour  of  the  petitioning  creditor  him- 
self (u). 

Exception  where  there  is  no  joint  estate. — If   in  the  1.  Exception 
case  of  a  bankrupt  firm  there  is  no  joint  estate  the  joint  where  there 
creditors    are   entitled   to   rank    as    separate  creditors  ^st"°Jomt 
against  the    separate  estates    of   the  individual    part- 
ners   (x).     So   if  one    partner  only  is  bankrupt,  the 
creditors  of  the  firm  are  entitled  to  rank  as  separate 
creditors  against  the  separate  estate  of  the  bankrupt,  if 
there  is  no  joint  estate  (y),  and  if  there  is  no  *solvent  [  *  732] 


(q)  As  to  co-debtors  not  partners,  see  Ex  parte  Field,  3  M.  I). 
&  D.  95;  Ex  parte  Buckingham,  1  M.  D.  &  D.  235;  Ex  parte  Cros- 
field,  1  Deac.  405. 

(r)  46  &  47  Vict.  c.  52,  \  40  (3)  and  §  59  (1).  ante,  p.  693. 

(s)  See  6  Geo.  4,  c.  16,  2  62:  Yate  Lee  and  Wace's  Law  of 
Bankruptcy,  243,  ed.  3;  Kobson  on  Bankruptcy,  735,  736,  ed.  6. 

(t)  See  Yate  Lee  and  Wace,  ubi  sup.  Mr.  Kobson  (Law  of  Bank. 
736,  ed.  6),  doubts  whether  the  exceptions  exist  any  longer. 

(m)  Qu.  as  to  this;  see  Robson  Bank.  736,  note  (/),  ed.  6.  The 
older  cases  establishing  the  exception  are  Ex  parte  Hall,  9  Ves. 
349;  Ex  parte  Ackerman,  14  Ves.  604;  Ex  parte  De  Tastet,  17 
Ves.  247;  Ex  parte  Burnett,  2  M.  D.  &  D.  357,  reversing  S.  C,  1 
ib.  608,  where  the  petitioning  creditor  Mas  a  joint  creditor  in 
respect  of  one  demand,  and  a  separate  creditor  in  respect  of  an- 
other. 

(x)  See  the  next  note. 

(y)  See  Ex  parte  Hayden,  1  Bro.  C.  C.  453;  Ex  parte  Sadler,  15 
Ves.  52;  Ex  parte  Bradshaw,  1  Gl.  &  Jam.  99;  Ex  parte  Bauer- 
man.  3  Deac.  476;  and  the  next  three  notes. 


798 


BANKRUPTCY. 


Bk.  IV. 

Chap.  4. 
Sect.  4. 


One  partner 
dead  solvent. 


Joint  estate 

small. 


[  *  733] 

Ex  parte 
Geller. 


ostensible  partner  (z),  or  at   all   events  none  in   this 
country  (a). 

The  fact  that  the  estate  of  a  deceased  partner  is  sol- 
vent does  not  deprive  the  joint  creditor  of  his  right 
against  the  separate  estate  of  the  bankrupt  (6).  This 
was  so  before  the  Judicature  Acts,  because,  the  legal 
remedy  surviving  against  the  latter,  the  creditor  had 
no  locus  standi  at  law  against  the  representatives  of 
the  deceased;  and  the  Judicature  Acts  leave  the  old 
rule  untouched,  as  the  joint  creditors  of  the  tirm  are 
not  separate  creditors  of  a  deceased  partner,  as  has  been 
pointed  out  in  an  earlier  portion  of  the  work  (c). 

Again,  if  several  firms  enter  into  a  joint  adventure 
and  one  of  them  becomes  bankrupt,  the  joint  creditors 
of  all  the  firms  may  prove  against  the  joint  estate  of  the 
bankrupt  firm,  if  the  partners  in  the  solvent  firms  are 
abroad  and  there  are  no  assets  belonging  to  all  the  firms 
jointly  (d). 

If  there  is  any  joint  estate,  however  small,  the  joint 
creditors  will  not  be  permitted  to  rank  pari  passu  with 
separate  creditors  against  the  separate  estate  (e).  But 
where  one  partner  only  is  bankrupt  nothing  can  be 
treated  as  joint  estate  by  reason  only  of  the  doctrines 
of  reputed  ownership  (/);  and  joint  property  which 
is  pledged  for  more  than  its  value,  or  which  for  any 
other  reason  cannot  to  any  extent  be  made  available  Eor 
the  benefit  of  the  creditors  of  the  firm,  is  treated,  with 
reference  to  the  rule  in  question,  as  having  no  exist- 
ence (g).     In  Ex  parte  *  Geller  (h),  it  was  accordingly 

(z)  See  Ex  parte  Kensington,  14  Ves.  447;  Ex-  parte  Janson,  3 
Madd.  229.  This  last  case  shows  that  for  this  purpose  a  person 
who  is  not  bankrupt  is  solvent.  The  existence  of  a  dormant 
partner  is  immaterial,  see  Ex  parte  Chuck,  8  Bing.  469;  Ex  parte 
Hodgkinson,  19  Ves.  294;  Ex  parte  Norfolk,  ib.  458. 

(a)  Ex  parte  Pinkerton,  6  Ves.  814,  n. 

(b)  Ex  parte  Bauerman,  3  Deac.  476.  The  creditors  of  the  sur- 
vivor could  not  insist  on  the  creditors  of  the  firm  going  against 
the  estate  of  the  deceased;  because  there  is  no  marshalling  ex- 
cept as  between  creditors  of  one  and  the  same  debtor.  See  ace. 
Ex  parte  Kendall,  17  Ves.  514 

(c)  See  Kendall  v.  Hamilton,  4  App.  Ca.  504.  and  ante,  pp. 
193.  598. 

(d)  Ex  parte  Nolte,  2  Gl.  &  J.  295  (overruling  Ex  parte  Wylie, 
2  Rose.  393),  Ex  parte  Machel,  1  Rose,  447, 

(e)  Ex  parte  Kennedy,  2  De  G.  M.  &  G.  228;  Ex  parte  Peake, 
2  Rose,  54;  Ex  parte  Harris,  1  Madd.  583.  Compare  Ex  parte 
Burdekin.  2  M.  D.  &  D.  704;  Ex  parte  Birlev.  ib.  354. 

(/)  Ex  parte  Taylor,  2  M.  D.  &  D.  753.     See  ante,  p.  685. 

(g)  See  Ex  parte  Peake,  2  Rose,  54;  Ex  parte  Hill,  2  Bos.  &  P. 
N.  R.  191,  note;  but  see  Ex  parte  Clay,  1  Mont,  Part.  223.  note; 
Ex  parte  Kennedy,  De  G.  M.  &  G.  228. 

(A)  Ex  parte  Geller,  2  Madd.  262. 


PROOF  AGAINST  SEPARATE  ESTATES.  799 

held  that  a  joint  creditor  who  had  sold  property  of  the  Bk.  IV. 
firm,  which  had  been  pledged  to  him  for  more  than  its  Clmp-  4. 

value,  might,  there  being  no  other  joint  property,  prove        '      

so  much  of  his  debt  as  remained  unpaid  against  the 
separate  estates  of  the  partners.  A  joint  creditor  hold- 
ing a  pledge  belonging  to  the  firm  must  sell  it  or  have 
it  valued  before  he  can  claim  to  rank  as  a  separate  cred- 
itor, for  until  he  has  done  that  he  is  not  in  a  position  to 
say  that  there  is  no  joint  estate  (i). 

If  it  is  doubtful  whether  there  is  any  joint  estate  or 
not,  an  inquiry  will  be  directed  (k). 

If  joint  creditors  prove  against  the  separate  estate  of  Reimbursing 
any  partner,  and  obtain  a  dividend  thereout  upon  the  separate 
assumption  that  there  is  no  joint  estate,  and  joint  estate  ^seauent 
is  afterwards  realised,  the  separate  estate  is  entitled  to  realisation 
be  repaid  the  amount  paid  to  the  joint  creditors  (I),        of  joint 

Joint  creditors  can  acquire  a  right  to  prove  against  estate. 
the  separate  estate  of  any  partner  by  paying  his  sepa-  Joint 
rate  creditors  20s.  in  the  pound  on  the  amount  of  their  ™'^ 
provable  debts  (m).  separate 

Exception  in  the  case  of  fraud. — It  has  been  already  creditors, 
seen   that   if  a   partner's  separate    property  has  been  2.  Exception 
fraudulently  converted  by  his  co-partners  to  the  use  of  m  cases  ol 
the  firm  which  becomes  bankrupt,  the  property  so  con-  Irau  ' 
verted  cannot  be  treated  as  part  of  the  joint  estate,  but 
must  be  placed  to  the  separate  account  of  the  defrauded 
partner  (n).     Upon  the  same  principle,  if  a  partner 
has  fraudulently  converted  to  his  own   use  property, 
which  in  truth  belongs  to  the  firm,  such  property  cannot 
be  treated  as  part  of  his  separate  estate  ;  but  forms  part 
of  the  joint  estate  of  the  firm.    Hence,  as  in  the  former 
case  proof  on  behalf  of  the  separate  estate  is  admitted 
against  the  joint  *  estate  (o),  so  in  the  latter  case,  if  [  *  734] 
the   firm   is   bankrupt,    proof    on  behalf   of    the    joint 
estate  is  admitted  against  the  separate   estate  (p);  al- 
though that  estate  may  not  in  the  result  be   greater  by 

(i)  This  follows  from  Ex  parte  Smith,  2  Rose,  64;  Ex  parte 
Barclay.  1  Gl.  &  J.  272;  and  cases  of  that  class.  In  Ex  parte 
Hill,  2  B.  &  P.  N.  R.  191,  note,  the  pledge  had  been  sold,  and 
the  creditor  proved  for  the  difference. 

(k)  Ex  parte  Birlev,  1  M.  D.  &  D.  387  ;  and  see  S.  C,  2ib.  354. 

(0  See  Ex  parte  Willock,  2  Rose,  392. 

(m)  See  Ex  parte  Chandler,  9  Ves.  35,  and  Ex  parte  Taitt,  16 
Ves.  193.     See  as  to  interest,  ante,  pp.  719,  721. 

(n)  Ante,  p.  725. 

(o)  Ex  parte  Harris,  2  V.  &  B.  210  ;  S.  C,  1  Rose,  437  ;  Ex 
parte  Sillitoe,  1  Gl.  &  J.  382. 

(p)  Ex  parte  Lodge  and  Feudal,  1  Ves.  J.  1(56  ;  Ex  parte  Smith, 
1  Gl.  &  Jam.  74  ;  Ex  parte  Watkins,  Mont.  &  McA.  57;  Ex  parte 
Cust,  Cooke's  Bank.  Law,  531.  ed.  8. 


800 


BANKRUPTCY. 


No  sufficient 
fraud. 


Bk.  IV.  reason  of  fraud  (g).    Moreover,  if  the  firm  is  not  bank- 

Chap.  4.  Sect.  rnpt5  proof  on  behalf  of  the  solvent  partners  is  admit- 

J ted  against  the   estate  of  their  bankrupt  co-partner  : 

and  in  this  case  the  solvent  partners  rank  as  separate 
creditors,  although  the  property  fraudulently  appro- 
priated by  the  bankrupt  belonged  not  to  them  exclu- 
sively, but  to  them  jointly  with  himself  (r). 

Whether  in  any  particular  instance  there  has  been  a 
fraudulent  misappropriation  of  the  partnership  prop- 
erty or  not  must  of  course  be  determined  by  the  facts 
of  each  case.  It  may,  however,  be  observed  that  the 
mere  circumstance  that  one  partner  is  indebted  to  the 
firm  is  no  proof  of  fraud  ;  and  even  if  he  has  acted  in 
violation  of  the  articles  of  partnership,  it  may  be  found 
that  those  articles  have  by  common  consent  been  habitu- 
ally ignored.  To  bring  a  case  within  the  exception 
now  under  consideration,  the  individual  partner  must 
in  effect  have  stolen  the  property  of  the  firm,  and  his 
breach  of  good  faith  must  not  have  been  acquiesced 
in  or  condoned  by  his  co- partners  (s).  Any  arrange- 
ment by  which  a  debt  arising  from  fraud  is  made  a 
matter  of  mere  partnership  account,  precludes  the  firm 
from  ranking,  in  respect  of  that  debt,  as  a  separate  cred- 
itor against  the  separate  estate  of  the  individual  part- 
ner (t). 

The  leading  cases  on  this  subject  are  Fordyce's  case 
and  Ex  parte  Lodge  and  Feudal. 

In  Fordyce's  case  (u),  A.,  B.,  C,  and  D.  were  part- 
ners as  bankers,  and  had  in  the  course  of  their  busi- 
ness discounted  a  number  of  bills  and  notes,  which  had 
thus  become  the  property  *  of  the  firm.  A.  fraudu- 
lently applied  to  his  own  use  some  of  these  bills  and 
notes.  He  was  subsequently  adjudged  bankrupt,  and 
shortly  afterwards  the  firm  itself  was  adjudged  bank- 
rupt. The  assignees  of  the  firm  claimed  to  prove  as 
separate  creditors  of  A.,  in  competition  with  his  other 
separate  creditors  and  against  his  separate  estate,  for 
the  value  of  the  bills  and  notes  thus  abstracted,  and 
they  were  allowed  so  to  do.     But  in  this  same  case  the 

(q)  Lacey  v.  Hill,  4  Ch.  D.  537,  affirmed  on  appeal  under  the 
name  Read  v.  Bailey,  3  App.  Ca.  94. 

(r)  Ex  parte  Yonge,  3  V.  &  B.  31,  and  2  Rose,  40.  The  judg- 
ment in  this  case  is  very  masterly. 

(s)  See  Ex  parte  Yonge,  3  V.  &  B.  31 ;  Ex  parte  Smith,  1  Gl.  & 
J.  74,  and  6  Madd.  2  ;  Ex  parte  Turner,  4  D.  &  Ch.  169  ;  Ex  parte 
Crofts,  2Deac.  102;  Ex  parte  Hinds,  3  De  G.  &  Sm.  613. 

{t)  See  Ex  parte  Turner,  4  D.  &  C.  169. 

(u)  Also  known  as  Ex  parte  Cust,  Cooke's  Bank.  Law,  531 
ed.8. 


Fordyce's 
case. 

[  *  735] 


PROOF  AGAINST  SEPARATE  ESTATES.  801 

assignees  were  not  allowed  to  prove  against  A.'s   sepa-  Bk TS^ 
rate  "estate  for  what  the  joint  estate  had  been  compelled  Se(;tp-4  ' 

to  pay  in  respect  of  bills  issued  by  him  in  the  partner- '. 

ship  name  for  private  uses  of  his  own. 

In  Ex  parte  Lodge  and  Feudal  (x),  the  facts  were  Ex  parte 
in  substance  as  follows.     John  Lodge  and  his  two  sons,  Lod^and 
James    and   John,    were  partners.      John  Lodge,   the 
father,  died,  having  bequeathed  his  residuary  personal 
estate  to  his  two  sons,  and  appointde  them  and  their 
mother  his  executors.     After  the  death  of  the  father, 
his  two  sons  continued  to  carry  on  the  old  business  to- 
gether for  two  years,  when  they  dissolved  partnership. 
No  accounts  were  taken,  but  it  was  arranged  that  James 
should  pay  the  debts  of  the  firm.     James  immediately 
entered  into  a  new  partnership  with  Fendal.     Fendal 
brought  in  12,000Z.   as   his  share  of  the   capital,  and 
James  Lodge  brought  in  the  same  amount  in  stock  and 
goods.     After   this,   James   Lodge,    without    Fendal's 
knowledge  or  consent,  applied  the  assets  of  the  new 
firm  in  paying  the  debts  of  the  old  firm,  and  the  private 
debts  of   himself,    James   Lodge.     Ultimately    James 
Lodge  and  his  partner  Fendal  became  bankrupt.     The 
joint  creditors  of  the  two  partners  Lodge  and  Fendal 
petitioned  for  liberty  to  prove  against  James  Lodge's 
separate  estate,  and  in  competition  with  his  separate 
creditors,  for  the  amount  of  the  assets  of  Lodge  and 
Fendal  thus  improperly  applied.     Lord  Thurlow,  rely- 
ing on  Fordyce's  case,  expressed  a  strong  opinion  in 
favour  of  the  proof,  and  allowed  it  de  bene  esse.     But, 
after  taking  time  to  consider,  his  Lordship  "thought 
he  could  not  permit  the  assignees  under  the  joint  com- 
mission to  prove  against  the  separate  estate  of  Lodge, 
without  deciding  upon  a  principle  that  must  apply  to 
all  cases,  and  constantly  occasion  the  taking  an  account 
between   the  partners  and  the  partnership  *  in  every  [     7dbJ 
joint  bankruptcy.     He  said  that  if  the  affidavits  had 
gone  the  length  of  connecting  the  bankruptcy  with  the 
institution  of  the  partnership  trade,  and  that  Lodge, 
with  a  view  of  swindling  Fendal  out  of  his  property, 
had  got  him  into  the  trade,  and  then  taken  the  effects 
of  the  partnership  into  his  own  hands,  with  a  view  to 
his  separate  creditors,    it  might   have  been    different. 
The  petition  on  the  part  of  the  joint  creditors,  to  prove 
against  the  separate  estate,  was  dismissed"  (y). 

(x)  1  Ves.  J.  165,  and  Cooke's  Bank.  Law,  530,  ed.  8.  ^ 

(?/)  The   passage    in  inverted    commas  is  taken  from  Cooke  s 

Bank.  Law.  530,  ed.  8.     See,  further,  as  to  the  necessity  of  fraud, 

Ex  parte  Grill    ih. 

*  28  LAW   OF   PAETNEESHIP. 


802 


BANKRUPTCY. 


Bk.  IV. 

Chap.  4. 
Sect.  4. 

3.  Exception 
in  cases  of 
distinct 
trades. 


[  *  737] 

Ex  parte 
Gliddon,  in 

re  Wakekarn 


Exception  in  the  case  of  distinct  trades. — The  same 
principle  which,  in  the  event  of  the  bankruptcy  of  a 
firm,  allows  proof  to  be  made  on  behalf  of  one  of  its 
members  against  its  joint  estate,  in  respect  of  a  debt 
contracted  by  the  firm  to  him  as  a  distinct  trader  (z), 
also  allows  proof  to  be  made  on  behalf  of  the  joint 
estate  of  a  firm  against  the  separate  estate  of  one  of  its 
partners,  who  has  carried  on  a  trade  distinct  from  that 
of  the  firm,  and  has  become  indebted  to  it  in  the  ordi- 
nary course  of  his  distinct  trading.  If,  therefore,  a 
person  who  is  a  partner  in  a  trading  firm  carries  on  a 
distinct  trade  of  his  own,  and  becomes  indebted  to  the 
firm  for  goods  sold  to  him  in  the  way  of  their  trades 
and  then  becomes  bankrupt,  the  firm  is  treated  as  a 
separate  creditor  for  the  debt  so  contracted,  and  is 
allowed  to  prove  accordingly  (a).  So,  in  the  case  of  a 
bankrupt  firm,  proof  for  debts  thus  contracted  by  an 
individual  partner  is  allowed  as  between  the  joint  estate 
of  the  firm  and  the  separate  estate  of  that  partner,  in 
competition  with  his  separate  creditors  (b).  As  Lord 
Eldon  put  it  it  Ex  parte  St.  Barbe,  "  a  joint  trade  may 
prove  against  a  separate  trade,  but  not  a  partner  against 
a  partner.  "  But  although  there  may  have  been  distinct 
trades,  still  if  the  debt  in  question  has  not  been  contract- 
ed in  the  ordinary  course  of  carrying  them  on,  such 
proof  will  not  be  allowed  (c). 

*  In  Ex  parte  Gliddon  (d)  an  ingenious  attempt  was 
made  to  obtain  the  benefit  of  the  above  rule  in  a  case 
where,  although  there  were  two  firms  in  appearance, 
there  was  really  only  one  and  an  agent,  and  no  such 
separate  trading  as  the  exception  requires.  In  appear- 
ance there  were  two  firms,  A.  and  B.  and  C.  and  D. ; 
but  D.  was  only  C.'s  agent  ;  and  C.  himself  was  only 
A.'s  agent ;  but  neither  B.  nor  D.  knew  this  to  be  so. 
Both  firms  became  bankrupt,  and  C.  and  D.  were  in- 
debted to  A.  and  B.  An  attempt  was  made  by  the 
trustee  of  A.  and  B.  to  prove  against  the  separate  es- 
tate of  D.  for  the  debt  due  from  C.  and  D.  to  A.  andB. 
But  it  was  held  that  there  was  no  such  trading  between 
A.  and  B.,  on  the  one  side  and  D.  on  the  other  as  was 
necessary  to  create  a  provable  debt.     The  circumstances 

(z)  Ante,  p.  725. 

(a)  Ex  parte  Hesham,  1  Rose,  146  ;  Ex  parte  Castell.  2  Gl.  & 
J.  124  ;  Ex  parte  Johns,  Cooke,  B.  L.  538,  and  Wats.  Part.,  286. 

(b)  Ex  parte  Ht.  Barbe.  11  Ves.  413. 

(c)  See,  as  to  this,  ante,  p.  726.  and  Ex  parte  Hargreaves,  1 
Cox,  440:  Ex  parte  Sillitoe.  1  Gl.  &  J.  382;  Ex  parte  Williams, 
3  M.  D.  &  D.  433,  there  cited. 

(d)  Re  Wakeharn  or  Ex  parte  Gliddon,  13  Q.  B.  D.  43. 


PROOF  AGAINST  SEPARATE  ESTATES.  803 

were  such  as  to  negative  the  existence  of  any  debt  from  Bk.  TV. 

D.  to  A.  and  B.     The  real  debt  was  owing  by  A.  to  A.  JhaP-  4-  Sect- 

and  B.  J 

Thirdly,  icith  respect  to  the  partners. 

The  principle  that  a  debtor  shall  not  be  allowed  to  2.  Position 
compete  with  his  own  creditors,  is  as  strictly  carried  out  °*  ~"e 
in  administering  the  separate  estates  of  individual  part- 
ners,  as  in  administering  the  joint  estate  of  a  firm.  The 
separate  estate  of  each  partner  is  liable  to  the  debts  of 
the  firm,  subject  only  to  the  prior  claims  of  his  sepa- 
rate creditors  ;  whence  it  is  obvious  that  one  partner 
cannot  compete  with  the  separate  creditors  of  his  co- 
partner, without  diminishing  the  fund  which,  subject 
to  their  claims,  is  applicable  to  the  payment  of  the  joint 
debts,  and  therefore  of  his  own  creditors.  In  other 
words,  the  rights  of  the  joint  creditors  preclude  one 
partner  from  ranking  as  a  separate  creditor  of  his  co- 
partner, until  the  joint  creditors  are  paid  in  full  (e). 
Moreover,  it  is  now  settled,  in  opposition  to  some  older 
cases  (/),  that  a  solvent  partner  is  not  entitled  to  rank 
as  a  creditor  against  the  estate  of  his  bankrupt  co- 
partner upon  indemnifying  that  estate  against  the  claims 
of  the  joint  *  creditors  ;  he  must  show  that  those  claims  [  *  738] 
are  discharged  or  otherwise  barred  (g). 

Although    a    partner  cannot  prove   against  his   co-  Assignee  of 
partner  so  long  as  the  joint  debts  are  unpaid,  yet,  if  a  solvent 
debt  owing  by  the  bankrupt  partner  to  his  co  partner  partner, 
has  been  cancelled,  and  in  consideration   thereof  the 
bankrupt  has  taken  upon  himself  a  debt  due  from  his 
co-partner  to  a  third  party,  this  debt,  so  substituted  for 
the  first,  may  be  proved  by  such  third   party,  in  com- 
petition with  the  other  separate  creditors  of  the  bank- 
rupt, whether  the  joint  creditors  are  paid  or  not  (h). 

The  disability  of  a  partner  to  prove  in  competition  pr0of  bv 

with  his  own  creditors,  prevents   proof  by   a  firm  to  firm  against 

which  he  belongs  against  his  own  separate  estate  ;  for  estate  ol 
. ° 5 £ bankrupt 

(e)  See,  accordingly,  Ex  parte  Collinge,  4  De  G.  J.  &  S.  533,  partner, 
wbere  the  result  of  such  proof  would  have  benefited  the  joint 
creditors  ;  Ex  parte  Carter,  2  Gl.  &  J.  233,  where  an  executor  of 
a  deceased  partner  sought  to  prove;  Ex  parte  Ellis;  ib.  312;  Ex 
parte  Rawson,  Jac.  274  ;  Ex  parte  Robinson,  4  D.  &  Ch.  499  ;  Ex 
parte  Mav,  3  Deac.  382. 

(/)  Viz.,  Ex  parte  Taylor,  2  Rose,  175  ;  Ex  parte  Ogilvy  .  177. 

(g)  Ex  parte  Moore,  2  Gl.  &  J.  166.  Compare  Ex  parte  An- 
drews, 25  Ch.  D.  505,  where  the  possibility  of  a  claim  being 
made  was  held  not  enough  to  prevent  the  executors  of  one  part- 
ner from  proving  against  the  surviving  partner.  The  joint  lia- 
bility in  that  case  was  really  visionary  only. 

(A)  Ex  parte  Todd,  De  Gex.  87. 


801  BANKRUPTCY. 

Bk.  IV.  proof  by  such  a  firm  is   obviously   nothing  more  than 

Chap.  4.  Sect,  proof  by  himself  and  co-partners  (i). 

^ The  principle    which  allows    joint   estate  to  prove 

against  separate  estate,  and  separate  estate  to  prove 
against  joint  estate,  in  cases  where  there  has  been  a 
fraudulent  conversion  of  property,  or  where  there  have 
been  distinct  trades,  and  a  debt  contracted  in  the  course 
of  those  trades,  is  also  applicable  to  proofs  by  one  part- 
ner against  another,  in  similar  cases  (j  ).  Moreover, 
if  A.,  intending  to  become  a  partner  with  B.,  advances 
him  money  as  his,  A.'s  share  of  the  common  stock,  and 
before  the  partnership  is  entered  into,  B.  becomes  bank- 
rupt, A.  may  prove  against  B.'s  separate  estate,  as  a 
separate  creditor  for  the  amount  of  the  advance,  unless 
A,  'without  being  a  partner,  has  made  himself  liable  to 
creditors  as  if  he  were  one  (k). 
[  *  739]  *  At  one  time  it  was  supposed  that  when  a  person  had 

Partnership  been  induced  by  the  fraud  of  another  to  join  him  in 
induced  by  partnership,  the  former  could  not,  on  the  bankruptcy  of 
fraud.  tjae  iatter,  prove  against  his  separate   estate,   for  the 

amount  paid  to  the  bankrupt  as  a  consideration  for  the 
partnership.      This  opinion  was  founded  on  the  case  of 
Ex  parte         Ex  parte  Broome  (I).     There  A.  was  induced,  by  the 
Broome.  faise  and  fraudulent  representations  of  B.,  to  enter  into 

partnership  with  him,  and  to  pay  him  a  considerable 
premium.  Shortly  afterwards,  B.  became  bankrupt, 
and  A.  sought  to  recover  out  of  B.'s  estate  the  amount  of 
the  premium  paid  as  above  mentioned.  According  to 
the  report  this  was  refused,  upon  the  ground  that,  al- 
though A  might  be  entitled  to  recover  the  money  as 
between  himself  and  B.,  yet  he  was  liable  with  B.  to  third 
persons,  viz.,  the  creditors  of  the  firm. 

The  report  of  this  case,  however,  is  not  warranted  by 
the  order  which  was  actually  made  in  it  (m).  Indeed, 
the  order  expressly  directed  that  A.  should  be  at  liberty 
to  prove  against  B.'s  estate,  and  that  A.  should  be  paid 
a  dividend  in  respect  of  his  proof,  rateably  with  B.'s 
other  creditors.  This  order  is  in  conformity  with  the 
opinion  expressed  by  Lord  Thurlow,  in  Ex  parte  Lodge 

(i)  See  ace.  Ex  parte  Smith,  1  Gl.  &  J.  74,  and  6  Madd.  2;  Ex 
parte  Turner,  4  D.  &  Ch.  169. 

(j)  See  Ex  parte  Westcott,  9  Ch.  626,  as  to  proving  for  a 
devastavit  by  an  executor;  Ex  parte  Maude,  2  Ch.  550.  where 
two  solvent  co-partners  sought  to  prove  against  the  separate  es- 
tate of  their  bankrupt  partner.     See  ante,  p.  726, 

(k)  Ex  parte  Turquand,  2  M.  D.  &  D.  339,  ante,  p.  72?  ;  and 
as  to  money  payable  to  a  person  in  lieu  of  his  being  taken  into 
partnership,  see  Ex  parte  Megarey,  De  Gex,  167. 

(/)  1  Rose,  69. 

(m)  See  the  order  in  1  Coll.  598. 


PROOF  AGAINST  SEPARATE  ESTATES.  SOU 

and  Feudal,  and  with  the  cases  oiHamil  v.  Stokes  (n)  Bk.  IV. 
and  Bury  v.  Allen  (o).  ScT'/' 

The  application  of  the  foregoing  doctrines  to  cases 


where  a  shareholder  in  an  unincorporated  company  has  Prom  by 
become  bankrupt,  and  the  company  seeks  to  prove  as  a  company 
creditor  against  his  separate  estate,  and  in  competition  estate  of 
with  his  other  separate  creditors,  has  given  rise  to  some  shareholder, 
difficulty.     But  in  Export  Davidson  (p),  it  was  held  Ex  parte 
that  the  public  officer  of  a  banking  company,  governed  Davidson, 
by  7  Geo.  4,  c.   46,  might  prove  against  the  separate 
estate  of  one  of  its  members  for  what  was  due  from  him 
as  a  customer  of  the  company,  in  respect  of  his  over- 
drawn account,  although  the  company  (including  there- 
fore the  bankrupt)  was  itself  indebted  to  other  persons  ; 
and  in  Ex  parte  *  Ball  (q)  it  was  held  that  a  liquidator  [  *  740] 
of  an  unregistered  and  unincorporated  company  being  ^x  parte 
wound  up  under  the  Companies  act,  1862,  was  entitled 
to  prove  against  the  estate  of  a  bankrupt  shareholder,  in 
respect  of  a  call  made  in  the  winding  up.    The  same  rule 
applies  a  fortiori  to  the  case  of  an  incorporated  com- 
pany.    Excepting,  therefore,  those  companies  which  are 
merely  large  partnerships,  not  empowered  to  sue  and  be 
sued  by  a  public  officer,  and  not  being  wound  up,  it  is 
now  settled  that  where  a  member  of  a  company  becomes 
bankrupt,  the  company,  whether  its  debts  are  paid  or 
not,  may  prove  as  a  separate  creditor  of  such  member 
for  what  is  due  from  bim  to  it,  either  in  respect  of 
calls  (?')  or  other  matters  (s).     But  the  company,  if  it 
holds  a  security  of  the  bankrupt  for  what  is  so  due, 
must  realise  the  security  and  prove  for  the  difference,  as 
inordinary  cases  (t). 

Hitherto  the  right  of  one  partner  to  rank  as  a  separate  one  partner 
creditor  of  his  co-partner,  has  been  considered  solely  may  rank  as 

with  reference  to  ioint  creditors  ;  it  is  necessary,  how-  a  separate 
. • I •! creditor  ot 

(n)  Dan.  '20,  and  4  Price,  166.  See,  on  this  case,  1  Mont.  Part, 
210. 

(o)  1  Coll.  589. 

( p)  1  M.  D.  &  D.  648,  and  on  appeal,  sub  nomine  Re  Caldecott, 
2  ib.  368  ;  settling  the  doubts  raised  in  Ex  parte  Marston,  Mon. 
&  Ch.  576  ;  Ex  parte  Prescott,  ib.  611  ;  Ex  parte  "Law,  ib.  590  ; 
and  Ex.  parte  Snape,  ib.  607. 

u/i  10  Ch.  48. 

(;•)  Ex  parte  Brown,  3  De  G.  &  S.  590  ;  Ex  parte  Nicholas,  2  De 
C.  M.  &  G.  271.     See  19  &  20  Vict.  c.  47,  I  90. 

(s)  Ex  parte  Davidson.  1  M.  D.  &  D.  648,  and  2  ib.  368  ;  Ex 
parte  Cooper.  2  M.  D.  &  D.  1;  Ex  parte  Wallis,  ib.  201.  Ex  parte 
Woodrofte,  Fonbl.  Bank.  Ca.  14,  cannot  be  supported. 

(t)  Ex  parte  Manchester  and  County  Bank.  3  Ch.  D.  481  ;  Ex 
parte  Cooper,  2  M.  D.  &  D.  1  ;  Ex  parte  Wallis,  ib.  201.  See,  also, 
Ex  parte  Council,  3  Deac.  201,  where  the  security  consisted  of 
shares  in  the  company  itself. 


SOb' 


BANKRUPTCY. 


Bk.  IV. 

(Jimp.  4. 
Sect.  4. 

his  co-part- 
ner, provided 
the  joint 
creditors  are 
not  preju- 
diced. 


[  *  741] 
Ex  parte 
Grazebrook. 


Effect  of 
paying  joint 
debts. 


ever,  also  to  notice  it  with  reference  to  separate  credit- 
ors. They  are  obviously  benefited  by  the  rule  which 
prevents  one  partner  from  proving  against  the  separate 
estate  of  his  co-partner  ;  but  it  is  not  for  their  sake  that 
such  rule  has  been  established  ;  and  where  the  reason 
for  the  rule  ceases  to  exist,  the  rule  itself  ceases  to  be 
applicable.  Hence,  if  there  never  were  any  joint  debts, 
or  if  all  those  which  once  existed  have  ceased  to 
exist  (u),  either  because  they  have  been  paid,  barred, 
satisfied,  or  converted  into  separate  debts,  then  one 
partner  who  is  a  creditor  of  another  may,  on  the  bank- 
ruptcy of  the  latter,  prove  against  his  separate  estate  in 
competition  with  his  other  separate  creditors. 

*  A  leading  case  on  the  subject  is  Ex  parte  Graze- 
brook  (v)  ;  there  a  dormant  partner  had  retired,  and  the 
continuing  partner  continued  the  business  and  was 
adopted  as  the  sole  person  liable  to  pay  the  debts  form- 
erly due  from  the  firm.  On  the  retirement  of  the  dor- 
mant partner,  the  accounts  of  the  firm  were  taken  and 
settled,  and  a  balance  was  found  due  to  him.  On  the 
bankruptcy  of  the  continuing  partner,  the  dormant  part- 
ner was  allowed  to  prove  as  a  separate  creditor,  for  the 
amount  of  the  balance  so  found  due,  although  there  were 
partnership  debts  still  unpaid,  because  these  debts  had 
been  converted  into  the  separate  debts  of  the  continuing 
partner,  and  by  the  statement  of  the  account,  the  latter 
had  become  debtor  for  the  balance  in  question  to  his  late 
co  partner. 

Again,  if  one  partner  has  paid  the  joint  debts,  he  is 
entitled  to  prove  as  a  separate  creditor  of  his  co- partner 
for  the  amount  of  the  share  which  ought  to  have  been 
paid  by  him  (w);  and  it  is  immaterial  whether  the  debts 
have  been  paid  before  or  since  the  bankruptcy  (x). 

In  cases  of  this  sort,  moreover,  the  amount  provable 
against  each  bankrupt  is  ascertained,  not  by  dividing 
the  whole  amount  of  the  debts  paid  by  the  number  of 
partners,  or  by  the  number  of  shares  held  by  them,  witti- 

(«•)  Ex  parte  Andrews,  25  Ch.  D.  505,  seems  to  show  that  it  is 
enough  if  they  have  not  been  proved,  and  are  not  likely  to  be  so. 

(v)  2  D.  &  Ch.  186.  See,  too,  Ex  parte  Gill,  9  Jur.  N.  S.  1303; 
Ex  parte  Hall,  3  Deac.  125.  In  Ex  parte  Dodgson,  Mont.  cSc  Mac- 
Ar.  445,  there  were  no  joint  debts.  So  in  Ex  parte  Davis,  4  De 
G.  J.  &  S.  523,  noticed  ante,  p.  21. 

(w)  See  Ex  parte  Watson,  4  Madd.  477;  Ex  parte  Carpenter, 
Mont,  ct  MacAr.  1;  Wood  v.  Dodgson,  2  M.  &  S.  195.  In  the 
two  last  cases  the  partner  who  had  paid  the  debts  had  retired 
and  been  indemnified  against  them  by  the  bankrupt. 

(x)  See,  in  addition  to  the  cases  in  the  last  note.  Moody  v.  King, 
2  B.  &  C.  558;  Parker  v.  Kamsbottom,  3  B.  &  C  257;  Ex  parte 
Young,  2  Rose,  40. 


PROOF  AGAINST  SEPARATE  ESTATES.  807 

out  reference  to  their  ability  to  pay  ;  but  by  treating  Bk.  IV. 
each  partner  as  liable  to  contribute  his  own  share,  calcu-  £  *p\4" 

lated  as  above,  and  also  to  contribute,  as  surety  for  the ! ! 

rest,  to  the  payment  of  what  is  due  from  them,  but 
which  they  are  themselves  unable  to  pay.  Those,  in 
fact,  who  can  pay,  must  make  up  for  those  who  can- 
not (y). 

Again,  although  where  one  partner  is  indebted  to  Proof  for 
the  firm,  *  and  the  lien  upon  his  share  is  insufficient  to  [  *  742] 
satisfy  such  debt,  the  deficiency  cannot  be  proved  against  what  is  not 
his  separate  estate  in  competition  with  the  joint  credit-  satisfied  by 
ors  of  the  firm,  or  until  they  are  paid  (z);  yet  such  de- 
ficiency is  provable  against  his  separate  estate  in  compe- 
tition with  his  separate  creditors,  where  the  rights  of 
the  joint  creditors  do  not  intervene  (a). 

Further,  if  the  separate  estate  of  a  partner  is  clearly  Separate 
insufficient  to  pay  his  separate  debts   excluding  that  estate  in- 
which  he  owes  to  his  co-partner,  the  latter  is  entitled  to  solvent, 
prove;  for,  ex  hypothesi,  there  is  no  possibility  of  any 
surplus  out  of  which  the  joint  creditors  can  be  paid  any- 
thing whatever.     They  therefore  are  in  no  way  preju- 
diced by  the  proof  (b). 

But  even  in  cases  in  which  the  right  to  prove  exists, 
the  proof  cannot  be  admitted  without  taking  the  part- 
nership accounts  ;  for  if  they  are  taken  the  debt  sought 
to  be  proved  may  be  found  to  be  balanced,  and  not  really 
to  exist  (c). 

Before  leaving  this  subject,  it  may  be  remarked,  that  Surplus  of 
where  one  partner  only  is  bankrupt,  and  his  trustee  ad-  J°^nt  estate 
ministers  the  joint  estate  of  the  firm,  as  well  as  the  sep-  ^j^tered 
arate  estate  of  the  bankrupt,  and  there   is   an  ultimate  under  a  sepa- 
surplus,  that   surplus  ought  to  be  divided  between  the  rate  adjudi- 
bankrupt  and  the  solvent  partners,  according  to  their  cation, 
respective  interests  therein. 

In  Ex  parte  Lanfear  (d)  one  of  two  partners  became  Ex  parte 
. . Lanfear. 

(y)  See  Ex  parte  Hunter,  Buck,  552  ;  Ex  parte  Moore,  2  Gl.  & 
J.  172;  Ex  parte  Plowden,  2  Deac.  456,  and  3  M.  &  A.  402,  over- 
ruling Ex  parte  Watson,  Buck,  449,  and  Ex  parte  Smith,  lb.  492. 

{z)  Ex  parte  Carter,  2  Gl.  &  J.  233  ;  Ex  parte  Ellis,  ib.  312  ; 
Ex  parte  Reeve,  9  Ves.  588,  which  shows  that  the  joint  creditors 
are  entitled  to  be  paid  interest  before  the  co-partners  receive 
anything. 

[a)  Ex  parte  Terrell,  Buck,  345  ;  Ex  parte  King,  17  Ves.  115  ; 
Ex  parte  Watson,  Buck,  449,  and  4  Madd.  477;  and  see,  as  to  this 
last  case,  2  Gl.  &  J.  172. 

(6)  Be  Levey,  4  De  G.  J.  &  S.  551.  See,  also,  Ex  parte  Sheen, 
6  Cb.  1).  235,  where  the  proof  was  by  a  person  who  had  held  him- 
self out  as  a  partner. 

(r-)  Sec  Ex  parte  Maude,  2  Ch.  550. 

\d)  1  Rose,  442. 


SOS  BANKRUPTCY. 

Bk.  IV.  bankrupt,  and  the  other  died,     The  bankrupt  partner 

oh^p*4*"  having  paid  all  his  creditors  20s.  in  the  pound,  the  sur- 

. '  plus  of  the  joint  and  of  his  separate  estate  was  ordered 

to  be  paid  over  to  him,  and  it  was  paid  over  accordingly. 
The  executor  of  the  deceased  partner,  however,  applied 
for  an  order  that  the  bankrupt  might  account  for  what 
was  due  to  the  deceased  in  respect  of  his  interest  in  the 
[  *  743]  surplus  of  the  joint  estate,  and  that  the  money  *  which 
had  been  restored  might  be  paid  into  court,  and  an  order 
to  that  effect  was  made. 

C.  Proof  against  both  the  joint  and  the  separate  estates. 

First,  general  rule  as  to  election. 

Rights  of  With  a  view  to  avoid  as  much  as  possible  any  inter- 

joint  and        ruption  in  the  statement  of  the  principles  according  to 
separate  which  the  conflicting  rights  of  the  creditors  of  the  firm, 

creditors.  an(j  ^e  separate  creditors  of  the  individual  partners, 
are  adjusted,  the  consideration  of  the  position  of  those 
creditors  who  are  both  joint  and  separate  (i.  e.,  of 
those,  who,  in  respect  of  the  same  debt,  have  the  option 
of  suing  either  all  the  partners  jointly,  or  some  or  one 
of  them  separately  from  the  others)  has  been  hitherto 
postponed. 

In  order  that  a  creditor  may  rank  as  a  joint  and  sep- 
arate creditor,  it  is  necessary  that  there  should  be  two 
distinct  rights  vested  in  him  at  the  same  time,  by  vir- 
tue of  which  he  is  enabled  to  pursue  either  of  the  two 
remedies  above  alluded  to.  The  modes  in  which  these 
rights  are  acquired  and  lost  have  been  already  investi- 
gated (Bk.  II.  c.  2),  and  consequently  it  is  unneces- 
sary to  refer  to  that  subject  in  the  present  place. 
Rule  against  Subject  to  the  exception  which  will  be  noticed  pres- 
double  proof,  ently,  a  person  to  whom  the  members  of  a  firm  are 
bound  jointly  and  severally  is  not  allowed  in  bank- 
ruptcy to  rank  as  a  creditor  both  against  the  joint  es- 
tate and  also  against  the  separate  estates,  or  any  of 
them ;  he  is  compelled  to  elect  whether  he  will  rank  as 
a  joint  creditor  or  as  a  separate  creditor  (e).  If  he 
elects  to  rank  as  a  joint  creditor  he  must,  like  other 
joint  creditors,  go  in  the  first  place  against  the  joint 
estate,-and  he  has  no  greater  rights  than  they  against 
the  separate  estates,  or  any  of  them;  whilst,  on  the 
other  hand,  if  he  elects  to  rank  as  a  separate  creditor 
he  must,  like  other   separate  creditors,  confine  himself 

(e)  See  Ex  parte  Bond,  1  Atk.  98;  Ex  parte  Banks,  ib.  106;  Ex 
parte  Rowlaudson,  3  P.  W.  405;  Ex  parte  Bevau,  10  Ves.  106;  Ex 
parte  Hay,  15  Ves.  4. 


RULE  AGAINST  DOUBLE  PROOF.  809 

la  the  first  place  to  the  separate  estates,  and  he  has  no  Bk.  IV. 
greater  rights  than  they  to  the  joint  estate  (/).  ChaP-  4- 

*  The  reasoning  upon  which  this  rule  is  founded  is  Sect  4' 
as  follows:  If  the  members  of  a  firm  are  bound  jointly  [  *  744] 
and  severally,  the  creditor  may  sue  them  all  jointly,  or  Eeason  of 
he  may  sue  all  or  any  of  them  separately,  but  he  can-  the  rule* 
not  do  both ;  and  as  he  cannot  do  both  before  bank- 
ruptcy, neither  ought  he  to  do  what  is  tantamount 
to  the  same  thing,  after  bankruptcy.  It  is  very  true 
that  if  he  sues  them  all  jointly,  he  can  levy  execution 
against  the  property  of  the  partnership,  or  against  the 
private  property  of  each  member,  or  against  both  at 
once;  but  so  can  any  joint  creditor.  So  far  as  analogy 
goes,  therefore,  there  is  no  reason  why  a  joint  and  sep- 
arate creditor  should  be  allowed  to  go  against  both 
estates  at  once,  whilst  a  creditor  who  is  merely  joint  is 
compelled  to  go  against  the  joint  estate  before  he  can 
go  against  the  separate  estate  (g),  Nor  is  this  all. 
The  grand  principle  in  bankruptcy  is,  as  far  as  possi- 
ble, to  distribute  the  bankrupt's  estate  equally  amongst 
all  his  creditors,  and  not  to  prefer  one  creditor  to  an- 
other. Now  if  a  joint  and  separate  creditor  were  to  be 
allowed  to  prove  against  both  estates  at  once,  he  would 
diminish  the  separate  estate  to  the  prejudice  of  the 
joint  creditors,  and  diminish  the  joint  estate  to  the  pre- 
judice of  the  separate  creditors,  and  gain  an  advantage 
over  them  both  (h).  Such  are  the  reasons  which  in- 
duced the  Courts  to  hold  that  a  joint  and  separate  cred- 
itor ought  not,  as  a  rule,  to  be  allowed  to  go  against 
both  estates  at  once,  but  that  he  should  be  compelled, 
like  other  creditors,  to  go  in  the  first  instance  against 
one  estate  only.  In  giving  the  option  to  him,  the 
Courts  act  in  analogy  to  the  rule,  by  which  a  joint  and 
separate  creditor  can,  as  he  pleases,  sue  his  debtors 
jointly  or  separately. 

In  conformity  with  the  rule  thus  established,  and  ex-  Examples  of 
cepting  always  the  statutory  exceptions  to  be  noticed  the  rule, 
presently,  a  creditor  who  is  a  joint  creditor  by  one  in- 
strument, and  a  separate  creditor  by  a  distinct  instru- 
ment, is  as  much  compelled  to  elect  as  if  his  joint  and 
separate  rights  were  conferred  by  one   *  and   the  same  [  *  745] 
instrument  (i);  and  if  a  firm  has  been  implicated  in  a 

(/)  Ex  parte  Bevan,  10  Ves.  106;  Bradley  v.  Millar.  1  Rose.  273. 

{g)  See  Ex  parte  Rowlanson,  3  P.  W.  405;  Ex  parte  Banks,  1 
Atk.  108;  Ex  parte  Bond.  ib.  98;  Lord  Eldon  followed  the  rule, 
but  disapproved  it;  see  Ex  parte  Bevan,  9  Ves.  --l:l'\  and  10  ib.  109. 

(A)  See  per  Lord  Hard  wick  in  Ex  parte  Bond.  1  Atk.  100. 

(i)  Ex partelhU,  2  Deac.  249.  Ex  parte  Vaughan,  3  P.  W. 
407,  is  not  law.     Query,  if  double  proof  will  not  be  uow  allowed 


810 


BANKRUPTCY. 


Bk.  IV. 

Chap.  4. 
Sect.  4. 


Eulepre-sup- 
poses  a 
creditor  to 
be  a  joint  as 
well  as  a 
separate 
creditor. 


Electing 
against 
estate  to 
prove. 


Election 
when  con- 
clusive. 

[  *  746] 


breach  of  trust,  the  cestui  que  trust  (who  thereby  ac- 
quires a  right  available  against  all  the  partners  jointly, 
as  well  as  against  each  of  them  separately)  cannot 
prove  against  the  joint  and  separate  estates  at  the  same 
time,  but  must  elect  against  which  he  will  prove  as  if 
he  were  an  ordinary  joint  and  separate  creditor  (j). 
The  same  rule  applies  in  cases  of  fraud  (k). 

The  doctrine  of  election,  however,  only  applies  where 
a  creditor  is,  properly  speaking,  a  creditor  as  well  of 
the  firm  jointly  as  of  some  or  one  only  of  its  members 
separately.  "Where,  therefore,  a  firm  has  been  dissolved, 
and  the  continuing  partner  is  to  pay  all  the  debts  of 
the  firm,  then,  inasmuch  as  a  creditor  of  the  firm  is  in 
no  way  affected  by  this  arrangement  unless  he  accedes 
to  it,  he  has  not,  without  having  acceded  to  it,  any 
right,  in  the  event  of  bankruptcy,  to  stand  as  the  sepa- 
rate creditor  of  the  continuing  partner  in  respect  of  the 
old  debt.  Under  such  circumstances  he  has  no  right  of 
election,  but  must  rank  as  a  joint  creditor  (I). 

The  rule  as  to  election  would,  obviously,  be  wholly 
useless  unless  an  election,  once  deliberately  made,  were 
held  to  be  final  (m).  On  the  other  hand,  it  would 
operate  with  great  harshness  if  a  creditor  were  held  to 
have  finally  elected,  when,  in  point  of  fact,  he  was  not 
in  a  position  to  judge  which  course  it  would  be  best  for 
him  to  adopt.  It  becomes,  therefore,  necessary,  before 
leaving  this  subject,  to  examine  the  circumstances 
which  have,  and  those  which  have  not,  been  held  to 
bind  the  creditor  in  this  respect. 

In  those  cases  in  which  a  creditor  has  been  held  to 
have  made  his  election  beyond  recall,  it  will  be  found 
that  he  acted  *not  only  with  a  full  knowledge  of  his 
position,  and  of  the  material  facts  of  the  case,  but  also 
in  some  manner  quite  inconsistent  with  the  character 
which  he  has  subsequently  sought  to  assume  (n) 

in  all  such  cases  as  these;  see  Ex  parte  Honey,  7  Ch.  178,  infra, 
p.  748. 

(j)  Ex  parte  Barnewall,  0  De  G.  M.  &  G.  795;  Ex  parte  Chand- 
ler. Re  Davison,  13  Q.  B.  D.  50.  Compare  Ex  parte  Sheppard, 
19  Q.  B.  D.  84,  infra,  p.  749.  where  the  act  applied. 

(k)   Ex  parte  Adainson,  8  Ch.  iJ.  807. 

{I)  Ex  parte  Freeman,  Buck,  471;  Ex  parte  Fry,  1  Gl.  &  J.  96, 
and  see  ante,  p.  705. 

(m)  A  surety  is  apparently  bound  by  the  election  of  the  princi- 
pal creditor.     See  Ex  parte  Carne,  3  Ch.  463. 

(n)  As  in  Ex  parte  Liddel.  2  Rose,  34,  and  see  Ex  parte  Adam, 
1  Ves.  &  B.  494;  Bradley  r.  Miller,  1  Rose,  273;  Ex  parte  Borro- 
dailes,  1  Mont.  Part.  129,  Appx.  was  a  somewhat  similar  case. 
See,  too,  Ex  parte  Solomon,  1  Gl.  &  J.  25;  Couldery  v.  Bartrum, 
19  Ch.  D.  394. 


RULE  AGAINST  DOUBLE  PROOF.  811 

That  which  is  principally  calculated  to  influence  the  Bk.  IV. 
creditor's  choice  is  the  comparative  solvency  of  the  joint  Chap.  4. 
and  of  the  separate  estates ;  and  in  order  to  make  his  elec- 


tion he  must  have  a  reasonable  time  to  inquire  into  the  Creditor 
state  of  the  different  funds.     He  is  entitled  to  defer  his  <-ntitled  to 
election  until  a  dividend  is  declared,  or  at  least  until  ^8m 
the  trustee  is  possessed  of    a  fund   to    make   a  divi-  stand  before 
dend  (o);  and  in  a  case  where  a  large  number  of  cred-  he  elects. 
itors  had  a  right  of  election,  and  the  estates  were  not 
so  ascertained  as  to  enable  the  creditors  to  elect,  a  tem- 
porary order  was  made  that  no  larger  dividend  should 
be  declared  of  the  one  than  of  the  other  estate  (p). 

A  joint  and  separate  creditor  ought,  it  seems,  to  Election 
prove  against  both  estates,  but  elect  which  he  will  be  wllen  not 
paid  out  of  before  he  takes  a  dividend  (q) ;  and  a  cred-  J^J?61™1  ** 
itor  who,  having  a  right  of  election,  proves  against  one 
estate  rather  than  another,  will  not  be  permitted  to 
transfer  his  proof  without  showing  the  grounds  which 
have  induced  him  to  change  his  mind  (r).  But  the 
mere  fact  of  his  having  proved  against  one  estate  will 
not,  if  he  has  received  no  dividend  from  it,  preclude 
him  from  proving  against  the  other  estate,  provided  he 
does  not  seek  to  disturb  any  distribution  of  it  which 
may  already  have  been  made  (s).  And  even  if  the 
creditor  has  not  only  proved,  but  received  a  dividend, 
still  if  he  can  show  that  he  did  so  in  ignorance  of  ma- 
terial facts,  he  will  be  allowed  to  vary  his  proof  on  re- 
funding the  dividend  he  has  received,  with  interest  (t). 

*  A  joint  and  separate  creditor  who  petitions  for  ad-  [  *  747] 
judication  of  bankruptcy  against  a  firm,  thereby  prima  Position  of 
facie  elects  to  be  treated  as  a  joint  creditor  (u)  ;  but  if,  creditor1DS 
instead  of  petitioning  against  the  firm,  he  petitions  for 
a  separate  adjudication  against  one  of  the  partners,  he 
may  afterwards  declare  whether  he  will  be  treated  as  a 
joint  or  as  a  separate  creditor  (v ).     And  if  the  separate 
adjudication  is  afterwards  superseded  in  consequence 

(o)  See  Cooke's  Bank.  Law,  275,  ed.  8,  Ex  parte  Butlin,  there 
cited;  Ex  parte  Bond,  1  Atk.  98;  Ex  parte  Bentley,  2«Cox,  218. 

{p)  Ex  parte  Arbouin,  De  Gex,  359. 

(q)  Ex  parte  Bentley,  2  Cox,  218. 

(?)  Ex  parte  Dixon,  2  M.  D.  &  D.  312. 

(s)  Ex  parte  Bielby ,  13Ves.  70;  Ex  parte  Masson,  1  Rose,  159. 

(/)  Ex  parte  Adamson,  8  Ch.  D.  807;  Ex  parte  Rowlandson,  3 
P.  W.  405;  Ex  parte  Bolton,  2  Rose,  389;  S.  C,  Buck,  7;  Ex  parte 
Husbands,  2  Gl.  &  J.  4,  reversing  S.  C,  5  Madd.  419;  Ex  parte 
Law,  3  Deac.  541,  and  Mon.  &  Ch.  111.     See,  also,  the  nextnote. 

(m)  That  be  may  be  allowed  to  withdraw  his  joint  proof  and 
prove  against  the  separate  estates,  or  one  of  them,  see  Ex  parte 
Chandler.  Re  Davison,  13  Q.  B.  D.  50. 

(v)  See  per  Lord  Eldon  in  Ex  parte  Bolton,  2  Rose,  390,  1. 


S12 


BANKRUPTCY. 


Bk.  IV. 
Chap.  4. 
Sect.  4. 


Exception  to 
the  rule 
against 
double 
proof. 


Reason  of 
the  excep- 
tion. 


[  *  748] 


of  an  adjudication  against  the  firm,  the  creditor  is  re- 
stored to  his  right  of  election  under  the  bankruptcy  of 
the  firm,  and  is  not  prejudiced  by  anything  he  may  have 
done  in  the  former  bankruptcy  (tv). 

Secondly,  cases  in  which  double  proof  is  allowed. 

The  rule  which  excludes  a  joint  and  separate  creditor 
from  receiving  dividends  from  two  estates  at  once,  was 
subject  to  an  exception  where  each  estate  represented  a 
different  trade  carried  on  by  a  different  firm.  For  ex- 
ample, if  a  firm  A.,  B.,  and  C.,  carrying  on  one  business, 
drew  a  bill  on  a  firm,  A.,  B.,  and  D.,  carrying  on  a  dis- 
tinct business,  and  the  bill  was  accepted  and  circulated, 
a  holder  of  the  bill  was  permitted  to  rank  as  a  creditor  of 
both  firms  at  the  same  time,  and  to  obtain  dividends 
from  their  respective  estates  accordingly. 

The  principle  upon  which  this  exception  was  found- 
ed was  that  there  were  distinct  trades  carried  on  with 
distinct  capitals,  and  that  the  debts  of  each  trade  were 
properly  payable  out  of  the  assets  of  the  persons  who 
carried  it  on,  whether  those  debts  were  collaterally 
secured  or  not  (x).  If  this  principle  had  been  logi- 
cally carried  ont,  double  proof  would  have  been  allowed 
in  all  cases  where  a  debt  had  been  contracted  by  two 
parties  carrying  on  distinct  trades  with  distinct  capitals, 
and  both  of  *  whom  had  become  bankrupt.  It  would 
have  been  immaterial  whether  the  bankrupt  parties 
were  a  firm  and  one  of  its  members  ;  or  two  firms,  one 
of  which  included  the  other  ;  or  two  firms  having  only 
one  partner  common  to  them  both.  It  would  also  have 
been  immaterial  whether  the  creditor  was  or  was  not 
aware  that  one  of  the  trades  was  in  fact  carried  on  by 
one  or  more  of  the  persons  who,  with  others,  carried 
on  the  other  trade.  Unfortunately,  however,  the  prin- 
ciple in  question  had  been  occasionally  lost  sight  of, 
and  the  consequence  was  that  the  cases  bearing  upon 
the  subject  were  in  an  unsatisfactory  state,  and  ex- 
tremely difficult  to  reconcile  (y). 

In  order,  however,  to  remove  the  doubts  and  difficul- 
ties which  had  thus  arisen,  the  following  clause  has 
been  inserted  in  the  Bankruptcy  act,  1883,  sched.  2: — 

18.  If  a  debtor  was  at  the  date  of  the  receiving  order  liable  in 


(w)  Ex  parte  Brown,  1  Rose,  433,  and  1.  V  &  B.  60 ;  Ex  parte 
Smith.  1  Gl.  &  S.  256. 

(x)  See  Ex  parte  Adam,  1  V.  &  B.  496  ;  Ex  parte  Bigg,  2  Rose, 
37. 

(?/)  See  the  1st  ed.  of  this  Treatise,  vol.  ii.  p.  1019  el  seq.,  and 
Goidsmid  v.  Cazenove,  7  H.  L.  C.  785. 


RULE  AGAINST  DOUBLE  PROOF.  S13 

respect  of  distinct  contracts  as  a  member  of  two  or  more  dis-  Bk.  IV. 
tinct  firms,  or  as  a  sole  contractor,  and  also  as  member  of  a  firm,  Chap.  4. 
the  circumstance  that   the  firms  are  in  whole  or  in  part  com-         "     


posed  of  the  same  individuals,  or  that  the  sole  contractor  is  also  Proof  in 
one  of  the  joint  contractors,  shall  not  prevent  proof  in  respect  of  respect  of 
the  contracts,  against  the  properties  respectively  liable  on  the  coutr^ctSi 
contracts. 

This  section,  it  will  be  observed,  extends  to  all  lia- 
bilities on  distinct  contracts  which  a  bankrupt  may  have 
entered  into,  either  as  a  member  of  two  or  more  distinct 
firms,  or  as  a  sole  contractor  and  also  as  a  member  of  a 
firm  (z).  The  section  applies,  although  there  may  not 
be  any  distinct  trades  at  all  ;  and  so  long  as  there  are 
distinct  contracts  between  such  persons  as  are  mention- 
ed in  the  section,  double  proof  is  now  admissible.  If, 
for  example,  the  members  of  a  firm  give  a  joint  and 
several  promissory  note,  the  holder  will  be  entitled  to 
prove  as  well  against  the  joint  estate  as  against  the 
separate  estates  of  the  partners  (a).  The  old  rule 
against  double  proof  still  remains  ;  but  it  is  now  sub- 
ject to  so  large  a  class  of  *  exceptions  as  to  render  the  [  *  749] 
rule  itself  practically  of  little  consequence.  Joint  and 
several  liabilities  arising  otherwise  than  by  distinct 
contracts  are,  comparatively  speaking,  few  in  number. 
All  frauds  and  breaches  of  trust  are  not  within  the  act; 
but  if  a  partner  who  is  a  trustee  improperly  lends  trust 
money  to  the  firm  the  cestui  que  trust  can  prove  both 
against  his  separate  estate  and  against  the  joint  estate 
of  the  firm,  for  such  a  case  is  within  the  act  (6). 

The  act,  however,  only  applies  where  there  are  two 
estates,  it  does  not  give  a  right  of  double  proof  against 
the  same  estate,  although  it  may  be  the  estate  of  a  firm 
carrying  on  two  businesses  in  different  places  (bb). 

Thirdly,  cases  where  a  secured  creditor  may  split  his  demand . 

The  rule  as  to  election  throws   a  joint  and  separate  Position  of 
creditor  wholly  upon  one  estate  or  wholly   upon  the  j«int  and 
other ;  whilst  the  exceptional  rule  as  to  double  proof  ^editors  who 

(z)  The  fact  that  the  contract  is  entered  into  by  one  of  the  have 
parties  as  a  partner  need  not  appear  from  the  contract  itself,  Ex  securities. 
parte.  Stone,  8  Ch.  914. 

(a)  Simpson  v.  Helming,  L.  R.  10  Q.  B.  406  ;  Ex  parte  Honey, 
7  Ch.  178.  As  to  the  Act  of  1861,  see  Ex  parte  Wilson,  7  Ch. 
490.  As  to  joint  and  several  covenants  to  pay  rent,  see  Re  Cor- 
bet t,  14  Ch.  D.  122. 

(b)  Ex  parte  Sheppard,  19  Q.  B.  D.  84.     Compare  ante  p.  7l">. 
(bb)  Banco  de  Portugal  v.  Waddell,  5  App.  Ca.  161,   affirming 

11  Ch.  D.  317. 


814  BANKRUPTCY. 

Bk.  IV.  allows  him  to  prove  his  whole  debt  against  both  estates 

Chap.  4.  a£  ^e  same  time   (c).     There  is,  however,  a  middle 

'     course,  and  one  which  is  open  to  a  joint  and  separate 

creditor  who  has  a  security  for  his  debt. 

It  has  already"  been  seen  that  under  ordinary  circum- 
stances a  creditor  whose  debt  is  secured  is  not  allowed 
to  prove  for  his  debt  without  giving  up  his  security(d) ; 
but  that  this  rule  does  not  extend  to  a  creditor  who  has 
the  security,  not  only  of  his  bankrupt  debtor,  but  also  of 
somebody  else  ;  nor  to  a  creditor  of  a  firm  having  a 
separate  security  from  one  of  the  partners,  nor  to  a 
creditor  of  one  partner  having  a  security  from  the 
firm  (e).  This  doctrine,  coupled  with  that  of  election, 
puts  a  person  who  is  a  joint  and  separate  creditor  of 
one  or  more  bankrupt  partners,  and  who  has  a  security 
for  his  debt,  in  this  position  : — 
[*750]  *  1.   He  may  prove  for  his  whole  debt  against  the 

estate  to  which  the  security  does  not  belong,  and  retain 
and  make  what  he  can  of  his  security  (/) ;  or, 

2.  He  may  give  up  his  security  ;  prove  for  the  whole 
debt  due  on  it  (i.  e.,  the  whole  secured  debt)  against 
the  estate  to  which  the  security  belongs,  and  then 
prove  for  the  residue  of  his  debt  against  the  other 
estate ;  thus  in  fact  splitting  his  demand  and  proving 
for  part  against  the  joint  estate,  and  for  the  residue 
against  the  separate  estates  of  the  partners,  or  vice  versa. 
Ex  parte  The  first  case  in  which  this  splitting  of  debts  was 

Ladbroke.  allowed  was  in  Ex  parte  Ladbroke  (g).  There  the 
bankrupt  firm  was  indebted  to  their  bankers  to  the  ex- 
tent of  27,000Z.  The  sum  of  18,000Z.,  part  of  this,  was 
secured  by  the  joint  notes  of  the  firm  and  by  a  mort- 
gage of  the  separate  property  of  one  of  the  firm.  This 
mortgage,  moreover,  extended  not  only  to  the  18,000?., 
but  to  further  advances,  and  contained  a  joint  and 
several  covenant  by  the  bankrupt  partners  to  pay  the 
18,000Z.  and  further  advances.  The  bankers  were  al- 
lowed to  prove  against  the  joint  estate  for  the  18,000Z., 
and  against  the  separate  estate  of  the  mortgagor  for  the 

(c)  Of  course  he  cannot  obtain  more  than  the  whole  amount 
due  to  him. 

(d)  Ante,  p.  714.  He  may  now  have  it  valued,  and  prove  for 
the  difference  ;  but  this  does  not  affect  the  principle  adverted  to 
in  the  text. 

(e)  Ante  p.  715,  and  see  Ex  parte  Thornton,  5  Jur.  N.  S.  212. 
(/)As  in  Ex  parte  Bate,  3  Deac.  358  ;  Ex  parte  Smyth,  ib.  597; 

Ex  pa  tie  Groom,  2  ib.  265.     He  can  now,  it  is  apprehended  prove 
against  the  other  estate  for  the  difference  between  his  debt  and 
the  value  of  the  security. 
{g)  2  Gl.  &  J.  81. 


ORDER  OF  DISCHARGE.  S15 

residue  of  their  debt,  after  deducting  therefrom  the  sum  Bk.  IV. 
obtained  by   a  sale  of    the  mortgaged   property   (h).  g^Pg 

The  report  of  the  judgment  is  to   the  effect  that  the U 

Lord  Chancellor  thought  that  the  bankers  were  entitled 
to  pursue  the  joint  liability  of  the  bankrupts  on  the 
promissory  notes  to  the  extent  of  those  notes,  and  at  the 
same  time  to  proceed  on  the  several  covenants  for  the 
residue  of  the  debt. 

Again,  in  Ex  parte  Hill  (i)  a  partner  covenanted  to  Ex  parte 
pay   4000Z,  and  assigned  as  a  security  3000Z.,  portion  Hill, 
of   his    capital  in    the  firm.       A  sum  of    3000Z.    was 
then  placed  in  the  books  of  *  the  partnership  to  the  [  *  751] 
credit  of  the  assignee,  and  the  firm  acknowledged  them- 
selves debtor  to  him  for  the  amount.     The  firm  became 
bankrupt,  and  although  the  creditor  was  not  allowed 
double  proof,  viz.,  for  3000Z.  against  the  joint  estate  of 
the  firm,  and  for  4000Z.  against  the  separate  estate  of 
the  covenantor,  yet  he  was  allowed  to  prove  for  the 
3000Z.  against  the  joint  estate,  and   for  the  remaining 
1000Z.  against  the  separate  estate  of  the  covenantor  (k). 


Section    V.  —  The  Bankrupt's    Order  of    Discharge. 

The  law  relating  to  the  discharge  of  a  bankrupt  was  Order  of 
recast  by  the  Bankruptcy  Act,  1883  (see  §§  28 — 31,  and  discharge, 
the  Bankruptcy  Rules  of  1886,  rr.  235—238).  An  or- 
der of  the  Court  must  be  obtained  before  a  bankrupt  is 
discharged  from  his  debts  and  liabilities.  Moreover 
the  Court  has  a  wide  discretion  conferred  upon  it,  and 
may  either  grant  or  refuse  the  order,  or  suspend  it  for 
a  time,  or  grant  it  subject  to  conditions  as  to  future 
earnings  or  property.  Further,  if  the  bankrupt  has 
been  guilty  of  certain  misdemeanors  (I),  the  Court  is 
forbidden  to  grant  the  order  at  all  ;  and  if  he  has  con- 
ducted himself  improperly  in  any  of  the  ways  specified 
in  §  28  (3)  or  §  29  the  Court  is  bound  either  to  refuse 

(h)  The  mortgage  security  had  been  sold  and  a  sum  of  mouey 
had  been  received  by  the  bankers  out  of  the  proceeds  of  the  sale, 
and  this  sum  was  deducted  from  the  sum  they  sought  to  prove 
against  the  separate  estate. 

(i)  3  M.  &  Ayr.  175.  and  2  Deac.  249. 

(k)  Some  deductions  were  made,  but  the  above  statement  is 
substantially  correct  with  reference  to  the  point  for  which  the 
case  is  cited  in  the  text. 

(/)  See  \  28  (2)  and  \  31. 


S1G 


BANKRUPTCY. 


Bk.  IV. 
Chap.  4. 
Sect.  5. 

Effect  of 
order  ol 
discharge. 

[*752] 


Effect  of 
bankrupt's 
order  of 
discharge. 


Wood  v. 
Dodgson. 


it,  or  to  suspend  it,  or  to  grant  it  subject  to  conditions 
as  to  future  earnings  or  property  (I). 

The  effect  of  an  order  of  discharge  is  to  discharge 
the  bankrupt  from  all  provable  debts  and  liabilities, 
with  some  exceptions  (m),  viz.,  crown  debts,  debts  pay- 
able under  Revenue  Acts,  or  to  sheriffs  or  other  public 
officers,  debts  or  liabilities  incurred  by  any  fraud  or 
fraudulent  breach  of  trust  to  which  *  the  bankrupt  was 
a  party  (n),  debts  or  liabilities  whereof  he  has  obtained 
forbearance  by  any  fraud  to  which  he  was  a  party. 

Whether  an  adjudication  is  joint  or  separate,  all  the 
creditors,  as  well  joint  as  separate,  are  entitled  to  be 
heard  against  the  granting  of  an  order  of  discharge  to 
the  bankrupt  (o). 

An  absolute  order  of  discharge  entitles  the  bankrupt 
to  all  property  subsequently  acquired  by  him  although 
the  bankruptcy  may  not  be  closed  (p). 

An  order  of  discharge  operates  as  a  discharge  of  the 
bankrupt  from  all  debts  provable  under  the  bankruptcy, 
whether  owing  by  him  alone  or  by  him  jointly  with 
others  (q). 

But  the  discharge  of  one  of  several  joint  debtors  does 
not  discharge  his  co-debtors  (r).  On  the  bankruptcy 
of  one  partner,  his  order  of  discharge  discharges  him 
from  all  demands  which  his  co-partners  may  have  had 
against  him,  and  which  were  provable  by  them.  A 
leading  case  on  this  head  is  Wood  v.  Dodgson  ($):  there 
the  defendant  had  covenanted  with  the  plaintiffs,  his 
co-partners,  on  their  retirement  from  the  firm,  to  in- 
demnify them  against  the  partnership  debts  ;  the  de- 
fendant became  bankrupt,  and  afterwards  the  plaintiffs 
were  compelled  to  pay  debts  of  the  firm.  The  de- 
fendant obtained  his  certificate,  and  this  was  held  to  be 
a  bar  to  an  action  brought  on  the  covenant  by  the  plan- 


(7)  As  to  not  keeping  proper  books  see  Be  Mutton,  19  Q.  B. 
D.  102. 

(m)  ?  30  (1),  as  to  debts  incapable  of  valuation,  see  Morgan  v. 
Hardy,  18  Q.  B.  D.  646. 

(n)  Not  necessarily  personally,  by  his  agent  or  partner  is 
enough,  see  Cooper  v.  Pritchard,  11  Q.  B.  D.  351  ;  Emma  Silver 
Mining  Co.  v.  Grant,  17  Ch.  D   122. 

(o)  46  &  47  Vict.  c.  52.  §  28  (5),  and  Rules  of  1886,  r.  235. 

(p)   Ebbs  v.  Boulnois,  10  Ch.  479. 

(q)  See  46  &  47  Vict  c.  52,  I  30  ;  Thompson  v.  Cohen,  L.  R. 
7Q.  B.  527  ;  Ex  parte  Hammond,  16  Eq.  614. 

(r)  I  30  (4);  Sleech's  case,  1  Mer.  570,  571. 

(s)  2  M.  &  S.  195,  and  see.  eontra,  Dally  v.  Wolferston,  3 
Dowl.  &  Ry.  269,  in  which,  however,  Wood  v.  Dodgson  was  not 
cited.  See  as  to  staying  a  partner's  certificate  until  the  partner- 
ship accounts  have  been  taken,  Ex  parte  Hadley,  1  Gl.  &  J.  193. 


ORDER  OF  DISCHARGE.  S17 

tiffs  ;  for  although  their  demand  accrued  subsequently  Bk.  IV. 
to  the  bankruptcy,  it  was  provable  therein  by  virtue  of  Chap.  4. 
the  enactment  in  the  bankruptcy  laws  relating  to  proofs  __!!l___ 
by  sureties.     The  same  point  has  been  decided  in  other 
cases  (t). 

*  An  order  of  discharge  granted  to  two  or  more  per-  [  *  753] 
sons  protects  each  and  all,  so  that  the  death  of  one  does  Joint  orders 
not  affect  the  others  ( u  ) .  of  discharge. 

Where  there  is  a  joint  adjudication  against  several 
partners,  and  some  of  them  appeal  from  it,  the  Court 
will  not  on  that  account  delay  granting  orders  of  dis- 
charge to  the  others  (x). 

For  further  information  relating  to  the  granting  and  Refusal  of 
refusal  of  orders    of  discharge,  the   reader  is   referred  orders  of 
to  treatises  on  bankruptcy.     Such  matters  illustrate  no  discharge. 
principle  of  the  law  of  partnership,    and  are  foreign, 
therefore,  to  the  objects  of  this  work  (y). 

The  same  observation  applies  to  the  law  and  practice  Allowance  to 
relating  to  the  allowance  made  to  a  bankrupt  out  of  his  bankrupt 
estate  for  the  support  of  himself  and  family  (z).    Upon  par  ners" 
this  subject,  however,  the  following   rules,  established 
under  the  old  practice,  may  still  be  usefully  noticed  : 

1.  Unless  a  sufficient  dividend  is  paid  both  to  the 
joint  and  to  the  separate  creditors  of  a  bankrupt  part- 
ner, he  will  not  be  entitled  to  any  allowance  (a). 

2.  If  both  classes  of  creditors  are  paid  a  sufficient 
dividend,  each  partner  will  be  entitled  to  an  allowance, 
although  he  may  have  contributed  little  or  nothing  to 
the  payment  of  the  joint  creditors  (6). 

3.  When  one  partner  only  is  bankrupt,  and  he  has 
paid  his  separate  creditors  in  full,  he  is  not  entitled  to 
an  allowance  out  of  the  joint  estate  to  the  prejudice  of 
the  joint  creditors  (c). 

4.  A  bankrupt  partner  is  not  entitled  to  a  double 
allowance,  one  in  respect  of  the  joint  and  the  other  in 
respect  of  his  separate  estate.     He  is  entitled  to  only 

(/)  Ex  parte  Carpenter,  Mont.  &  McAr.  1  ;  Aflalo  v.  Fourdri- 
nier,  6  Bing.  306  ;  Wright  v.  Hunter,  1  East,  20. 

(h)  See,  as  to  advertising  a  joint  certificate  as  a  separate  one, 
Ex  parte  Carter,  1  M.  &  A.  115  ;  Ex  parte  Cossart,  1  Gl.  &  J.  248  ; 
Ex  parte  Currie,  10  Ves.  51. 

(x)  Ex  parte  Braggiotti,  2  De  G.  M.  &  G.  964. 

(y)  An  order  of  discharge  may  apparently  be  void,  see  Wagner 
v.  Imbrie,  6  Ex.  882  ;  Allcard  v.  Weeson,  7  ib.  753  ;  Courtivron  v. 
Meunier,  6  ib.  74. 

(z)  See  I  64. 

(a)  Ex  parte  Goodall,  2  Gl.  &  J.  281 ;  Ex  parte  Farlow,  1  Rose, 
421  ;  Ex  parte  Powell,  1  Madd.  68. 

(b)  Ex  parte  Morris,  Mon.  505  ;  Ex  parte  Gibbs,  105. 

(c)  Ex  parte  Holmes,  3  V.  &  B.  137. 

*  29   LAW   OF   PARTNERSHIP. 


818 


BANKRUPTCY. 


[  *  754] 
Bk.  VI. 
Chap.  4.  Sect. 
6. 


one  allowance,  *  calculated  on  the  amount  of  his  sepa- 
rate estate,  and  of  his  share  of  the  joint  estate  (d). 

5.  Where  a  separate  adjudication  is  annulled  in 
favour  of  a  joint  adjudication,  the  bankrupt's  right  to 
an  allowance  is  not  prejudiced  (e). 

An  undischarged  bankrupt  is  liable  to   be  sued  and 

bank- 


Position  of 

undischarged  otherwise  proceeded  against  as  if  he  were  not  a 


bankrupt. 


50  &  51  Vict, 
c.  66. 


rupt  ( /) ;  but  proceedings  against  him  may  be  stayed 
either  by  the  Court  in  Bankruptcy  or  by  the  Court  in 
which  they  are  taken  (g). 

The  discharge  of  persons  adjudicated  bankrupt  under 
the  Bankruptcy  act,  1869,  or  any  previous  Bankruptcy 
act,  and  the  closure  of  Bankruptcy  proceedings  com- 
menced before  the  Bankruptcy  act  of  1883  came  into 
operation,  are  governed  by  the  Bankruptcy  discharge 
and  closure  act,  1887.  But  there  is  nothing  in  it  which 
specially  relates  to  partners. 


Section  VI. — Arrangements  "With  Creditors. 


Arrange- 
ments with 
creditors. 


[*755] 


By  the  Bankruptcy  act,  1883,  debtors,  whether  part- 
ners or  not,  are  enabled,  either  before  or  after  adjudi- 
cation, to  compound  or  make  arrangements  with  their 
creditors  respecting  their  debts  and  liabilities,  and 
their  release  therefrom,  and  for  the  distribution,  inspec- 
tion, management,  and  winding  up  of  their  estates  ; 
and  the  arrangements  so  made  are  binding  not  only 
on  assenting  but  also  on  all  other  creditors,  provided 
certain  conditions  which  are  specified  in  the  act  are 
duly  observed  and  the  Court  approves  of  the  scheme  (h). 
If  the  scheme  is  approved,  the  receiving  order  is  re- 
scinded, and  the  *  bankrupt  (if  there  is  no  trustee) 
is  restored  to  his  property  (£).  It  is  not,  however, 
necessary  further  to  advert  to  the  law  on  this  subject  ; 
for  there  is  nothing  in  it  peculiar  to  partners  except  as 
mentioned  below. 

(d)  Ex  parte  Lonias,  1  Mon.  &  A.  525.  See,  too,  Ex  parte 
Bate,  1  Bro.  C.  C.  453  ;  Ex  parte  Minchin,  Mont.  &  MacAr.  135. 

(e)  Ex  parte  Llewellen,  3  M.  D.  &  D.  573. 

(/)  This  seems  to  follow  from  the  fact  that  the  Bank.  Act, 
1883,  contains  no  provision  to  the  contrary. 

{g)  46  &  47  Vict.  c.  53,  §  10  (2)  and  \  102  (2  and  4). 

(A)  46 &  47  Vict.  c.  52,  \\  18  and  23,  and  Bank.  Rules,  1886, 
rr.  195  to  216.  See,  as  to  the  approval  of  the  Court,  Ex  parte 
Eeed  and  Bowen,  17Q.  B.  D.  244  ;  Ex  parte  Bischoffsheiin,  19  Q. 
B.  D.  33,  and  ib.  20  Q.  B.  D.  258. 

(t)  Bank.  Eules,  1886,  r.  208. 


ARRANGEMENTS  WITH  CREDITORS.  SI 9 

The  Bankruptcy  rules,  1886,  rr.  266  and  267.  are  Bk.  VI. 
however  important.  They  authorise  in  the  case  of  part-  Chap.  4. 
ners  several  schemes,  viz.,  a  scheme  for  the  joint  liabil-  ' 


ities  of  the  tirm,  and  separate  schemes  for  the  separate  Several 
liabilities  of  its  several  members.  schemes. 

266.  At  the  first  meeting,  or  any  adjournment  thereof,  the 
joint  creditors  and  each  set  of  separate  creditors  may  severally 
entertain  proposals  for  compositions  or  schemes  of  arrangement 
under  sect.  18  of  the  act  (ft).  So  far  as  circumstances  will  allow, 
a  proposal  entertained  by  joint  creditors  may  be  confirmed  and 
approved  in  the  prescribed  manner,  notwithstanding  that  the 
proposals  or  proposal  of  some  or  one  of  the  debtors  made  to  their 
or  his  separate  creditors  may  not  be  entertained,  confirmed  and 
approved. 

267.  Where  proposals  for  compositions  or  schemes  are  made  by 
a  firm,  and  by  the  partners  therein  individually,  the  proposal 
made  to  the  joint  creditors  shall  be  considered  and  voted  upon  by 
them  apart  from  every  set  of  separate  creditors;  and  the  proposal 
made  to  each  separate  set  of  creditors  shall  be  considered  and 
voted  upon  by  such  separate  set  of  creditors  apart  from  all  other 
creditors.  Such  proposals  may  vary  in  character  and  amount. 
Where  a  composition  or  scheme  is  approved,  the  receiving  order 
shall  be  rescinded  only  so  far  as  it  relates  to  the  estate,  the  cred- 
itors of  which  have  confirmed  the  composition  or  scheme. 

If  default  is  made  in  any  payment  under  a  composi-  Default  in 
tion  or  scheme  the  remedy  is  to  apply  to  the  Court  (I),  payment. 

The  Court  has  power  to  annul  the  composition  or 
scheme  if  default  is  made  in  payment  of  any  instalment 
due  under  it,  or  if  it  cannot  proceed  without  injustice 
or  undue  delay,  or  if  the  approval  of  the  Court  was  ob- 
tained by  fraud  (m). 

Whether  the  debtor  is  adjudged  bankrupt  or  not,  if  Effect  of 
a  trustee  is  appointed,  the  property  of  the  debtor  vests  scheme, 
in  him  and  his  title  to  it  relates  back  as  if  he  were  a 
trustee  in  a  bankruptcy  (n). 

*  The    debts    provable    are    the    same  as  in  bank-  [  *  756] 
ruptcy  (o);  and,  unless  otherwise  agreed  and  approved, 
the  rules  respecting  the  payment  of  joint  debts  out  of 
joint  estate  and  of  separate  debts  out  of  separate  estate 
are  also  the  same  as  in  bankruptcy  (o). 

(ft)  Or  under  ?  23,  see  r.  216. 

(/)  Bank.  Rules,  1886,  r.  211,  and  see  Ex  parte  Godfrey,  18  Q. 
B.  D.  670. 

(m)  46  &  47  Vict.  c.  52,  \  18  (11)  and  \  23  (3),  and  see  Bank. 
Rules.  1886,  rr.  211  to  213;  Ex  parte  Moon,  19  Q.  B.  D.  669. 

(n)  lb.  |  18  (12  and  13)  and  %  23. 

(o)  46  &  47  Vict.  c.  52,  and  Bank.  Rules,  1886,  r.  215. 


820  BANKRUPTCY. 

Bk.  VI.  A  composition  or  scheme  duly  accepted  and  approved 

Chap.  4.  Sect.  bjncl8  all  the  creditors  so  far  as  relates  to  their  provable 

; debts  (p) :  but  it  does  not  release  any  person  who  would 

not  be  released  by  an  order  of  discharge  (q). 

A  discharge  by  joint  creditors  does  not  affect  the  sep- 
arate creditors  nor  vice  versa  (r). 

After  a  complete  discharge   the    debtor's    after- ac- 
quired property  belongs  to  him  (s). 
50  &  51  Vict.      By  the  Deeds  of  arrangement  act,  1887,   all  instru- 
c.  57.  ments  of  arrangement  with  creditors  (otherwise  than  in 

pursuance  of  the  bankruptcy  law),  must  be  registered, 
and  are  declared  void  if  not  registered  (see  §  5).  But 
the  act  has  no  provisions  specially  affecting  partners  : 
nor  have  the  rules  of  1888  which  have  beeD  issued  in 
order  to  carry  it  into  effect. 

(p)  lb.  I  18  (8)  and  g  23. 
(g)  lb.  I  18  (15)  and  \  23. 

(/■)  See  Meggy  v.  Imperial  Discount  Co.,  3  Q.  B.  D.  711. 
(s)  Ex  parte  Wainwright,  19  Ch.  D.  140;  Ebbs  v.  Boulnois,  10 
Ch.  479. 


INDEX. 


[The  paging  refers  to  the  [*]  pages.] 

ABANDONMENT 

of  right,  an  answer  to  an  action  to  enforce  it,  470 
of  insurance,  notice  of  by  one  partner  good,  139 

ABATEMENT, 

plea  in,  abolished,  264.     And  see  Addenda 

ACCEPTANCE, 

of  bills.     See  Bills  of  Exchange 

in  blank,  power  of  partner  to  make,  130 

ACCORD  AND  SATISFACTION, 

when  a  defence  to  an  action  for  an  account,  515 

ACCOUNT, 

persons  entitled  to  an,  492 
co-owners,  56 — 62 
partners,  492 

persons  interested  in  the  estate  of  a  deceased  partner,  493 
trustee  of  bankrupt  partner,  493,  648 
sub-partners,  493 

servants  sharing  profits,  12,  13,  35,  note  (s),  493 
transferee  of  share  of  partner,  364 
old  action  of,  560,  note  (k) 

between  co-owners,  59,  560,  note  (k) 
between  merchants,  259 
action,  before  the  Judicature  Acts,  by  one  partner  against  another 
for  not  rendering  an,  563 
for  balance  of  an.  564 

for  matters  involving  the  taking  of  an,  567 
for  matters  not  involving  any,  564 
ACCOUNT,  ACTION  FOR.     See  Action 
who  may  bring,  492  et  seq. 
partners,  492 

persons  entitled  to  share  of  partner,  493 
servants.  493 
subpartners  when,  493 
creditors  of  deceased  partner,  494 
against  whom,  493,  496 
costs  of,  517 

not  dismissed  because  plaintiff  entitled  to  damages,  458 
where  no  dissolution  is  sought,  494  et  seq. 

where  a  limited  as  distinguished  from  a  general  account  is  desired,  494 
in  respect  of  illegal  transactions,  103 
in  case  of  mines,  498 
where  partner  refuses  to,  497 

(821) 


822  INDEX. 

[The  paging  refers  to  the  [*]  pages.] 
ACCOUNT,  ACTION  FOR— continued. 

where  partner  attempts  to  compel  a  dissolution,  497 

where  business  has  failed,  498 

discovery  in,  501 

in  cases  of  exclusion,  496 

of  benefits  obtained  bv  one  partner  at  the  expense  of  the  firm,  305  etseq., 

496 
of  profits  derived  from  use  of  partnership  property,  309 
of  profits  derived  by  one  partner  by  reason  of  his  connection  with  the 

firm,  305 
of  profits  made  by  the  use  of  the  capital  of  a  partner  since  a  dissolution, 

521  et  seq.     See  Profits,  Account  of 
where  profit  not  yet  realised,  496 
of  several  partnerships,  501 
defences  to  action  for,  506.     See  Defence 

denial  of  partnership,  507 

illegality  of  partnership,  105 

Statute  of  Limitations,  257  et  seq.,  508  et  seq. 

accounts  stated,  512 

award,  514 

payment,  515 

release,  516 
parties  to  action  for 

between  partners  generally,  459  et  seq. 

by  sub-partner,  460 

against  executors  of  deceased  partner,  461 

surviving  partners  not  necessary  parties  to  action  by  legatees,  611 

some  on  behalf.  &c,  when  sufficient,  461 

motion  tor,  before  hearing,  501 
period  over  which  an  account  is  to  extend,  519 

time  from  which  the  account  is  to  be  taken,  519 

time  up  to  which  the  account  is  to  be  taken,  520 
of  dealings  prior  to  commencement  of  partnership,  520 
of  subsequent  profits  when  a  dead  or  retired  partner's  capital  has  been 

left  in  the  concern,  521 — 536.     See  Profits 
judgment  for  a  partnership,  516 

before  trial,  501 

forms  of,  516,  517,  note  (w) 

just  allowances  in,  519 

evidence  on  taking,  536 
judgment  for,  on  the  administration  of  the  estate  of  a  deceased  partner, 

600 
See  Accounts 

ACCOUNT  STATED, 

when  binding  on  incoming  partner,  209 

a  defence  to  an  action  for  an  account,  512 

by  a  majority  binding  minority,  512,  note  (d) 

impeachment  of,  for  fraud,  &c,  513 

re-opening,  420,  421 

surcharging  ami  falsifying,  513 

between  the  executors  of  a  deceased  partner  and  his  surviving  partners; 

effect  of,  613 
action  for  balance  of,  not  restrained  because  there  are  others  unsettled, 

543 

ACCOUNTS, 

of  partnership  generally,  396 
authority  of  partner  to  deliver,  128 
authority  of  partner  to  settle,  128,  136 


INDEX.  823 

[The  paging  refers  to  the  [*]  pages.  ] 
ACCOUNTS— continued. 

imputation  of  payments  in  cases  of,  228 

not  to  be  taken  backwards,  230 

right  to  keep  accounts  of  successive  firms  separate,  233 

transfer  of  debt  from  one  to  another,  234 

effect  on  incoming  partner,  230 

between  merchant  and  merchant,  time  within  which  actions  concerning 

must  be  brought,  257—263,  508  et  seq. 
false  rendered  by  one  partner,  liability  of  firm  for,  165 
approved  of  by  majority,  when  binding  on  minority,  512,  note  (d) 
conclusive  for  one  purpose  but  not  for  another,  421 
effect  of  keeping  erroneous  on  right  to  dissolve,  581 
effect  of  confusion  of,  on  right  to  interest,  392 
penalties  for  falsifying,  destroying,  &c,  404 
agreements  as  to  keeping,  420 

effect  of  non-observance  of  agreement  to  take  periodical,  421,  422,  430 
reopening  settled,  420,  421 
effect  of  acquiescence  in,  467 

misrepresentations  as  to  state  of,  aground  for  rescinding  contracts,  486 
surcharging  and  falsifying,  513 

evidence  on  which  partnership  accounts  are  taken,  536  et  seq. 
special  directions  as  to  taking  of,  537 
injunction  to  restrain  publication  of,  542,  note  (e) 
ultimate  adjustment  of,  401 

where  equality  of  loss  and  inequality  of  capital,  403 
settled  by  one  executor.  488,  note  (m) 
mode  of  keeping  partnership  accounts,  396  et,  seq. 
duty  to  keep  and  the  right  to  inspect  partnership  accounts,  404  etseq. 
of  joint  and  separate  estates  to  be  kept  distinct  in  bankruptcy,  693 
how  taken  in  bankruptcy,  695 — 697 
See  Account,  Action  foe 

ACCOUNTANT, 

inspection  of  documents  by,  504 

employment  of,  by  court,  538 

modes  of  taking  accounts  by,  different  from  legal  mode,  396,  695 — ^697 

ACKNOWLEDGMENT, 

effect  of,  as  regards  the  statute  of  limitations,  260,  511 
when  made  by  one  partner,  263 
See  Ratification,  143 ;  Laches,  466 

ACQUIESCENCE, 

of  plaintiff  in  what  is  complained  of,  when  a  bar  to  relief,  318,  467 

ACT  OF  PARLIAMENT, 

persons  procuring,  not  partners,  22 
See  Statute 

ACTIONS 
1.  Generally 

general  remarks  on,  264,  265,  456 
general  principle  as  to  parties,  265 
effect  of  non-recognition  of  firm  on,  115,  116 
effect  of  Judicature  acts,  264 

no  distinction  between  legal  and  equitable  rules,  264 

no  action  defeated  by  nonjoinder  or  misjoinder,  264 

pleas  in  abatement  abolished,  264.     And  see  ADDENA 

as  topersons  jointly  or  jointly  and  severally  entitled  orliable, 

265,  282 
joint  and  several  claims  may  be  joined,  265 


824  INDEX. 

[The  paging  refers  to  the[*]  pages.  7 
ACTIONS— continued. 

1 .  Generally — continued. 

parties  required  by  defendants  may  bejoined,  265 
some  or  one  may  sue  on  behalf  of  all,  265 
partners  may  sue  or  be  sued  in  name  of  firm,  115,  265,  274, 
456,  458  * 

discovery  of  partners,  265 

as  to  the  use  of  where  partners  have  changed,  266 
as  to  service  of  writ  where  name  of  firm  is  used,  272 
as  to  making  defendants  persons  who  ought  to  be  co-plaintiffs, 

267 
by  firm  against  a  partner,  459 
by  partner  against  his  firm,  267 
firms  with  common  partner  may  sue  each  other,  267 
as  to  defences  founded  on  conduct  of  one  partner,  267 — 270 

of  deceased  partner,  268 
for  account.     Bee  Account 

an  injunction.     See  Injunction' 
a  receiver.     See  Receiver 

rescission  of  contract.     See  Rescission  of  Contract 
specific  performance.     See  Specific  Performance 
defences  to.     See  Account,  Action  for  ;  Defence 
laches,  406*/  *<q.     See  Laches 
illegality,  102  et  acq.     See  Illegality 
against  bankrupt  not  allowed,  718 
in  respect  of  legal  rights,  271!  etseq. 

equitable  rights.  283  et  seq. 
in  case  of  fraud,  parties  to,  284 
where  one  partner  exceeds  his  authority,  282 
ex  delicto,  278,  283 

by  trustee  of  bankrupt  partners  and  the  solvent  partners,  670 
by  several  trustees  in  bankruptcy,  646,  647 
may  be  brought  by  unknown  principals,  275 
on  contracts  with  A.  &  Co.,  274 
formerly  election  between,  and  proof  in  bankruptcy,  718,  note  (d) 

2.  by  partners  against  non-partners,  273  et  scq. 

illegality  of  partnership  a  defence  to,  103 
implied  powers  of  partner  as  to,  271 
on  contracts  under  seal,  273 
on  bills  and  notes,  274 

in  name  of  firm,  274 

accepted  for  honour,  274 
on  ordinary  contracts,  275 

for  torts,'  278—280 
for  libel,  278 
ejectment,  279 

by  incoming  partner,  284  etseq* 
by  retired  and  continuing  partners,  286,  287 
by  surviving  partners,  2(i7 — 269,  288 
by  trustees  of  bankrupt  partners,  288,  289,  670 
by  solvent  partner,  289.  670 
by  dormant  partners,  276 
by  nominal  partners,  276 
when  to  he  brought  by  one  partneronly,  277 
may  be  brought  in  name  of  those  not  named,  275 
nonjoinder  not  pleadable  in  abatement,  264 
when  one  partner  colludes  with  defendant,  279 
where  contract  not  made  with  firm,  277 
by  one  firm  against  another  whereone  partner  is  common  to  botb.,267,569 


INDEX.  S25 

[The  paging  refers  to  the  [*]  pages.  ] 
ACTION— continued 

2.  by  partners  against  non-partners — continued 

when  a  defence  against  one  partner  is  a  defence  against  all,  116,  117, 
267,  268 

3.  by  non-partners  against  partners,  280  et  seq. 

when  one  only  may  be  sued.  281 
illegality  of  partnership  no  defence  to,  103 
on  contracts,  280 

not  binding  firm,  282 
for  torts.  283 
against  incoming  partners,  285,  286 

retired  and  continuing  partners,  286 
surviving  partners,  288 

where  the  executors  of  the  deceased  are  also  being  sued,  598 
et  seq. 
effect  of  change  in  firm,  284,  285 
against  solvent  and  bankrupt  partners.  289 
infant  partners,  280,  281 
dormant  partners,  281 

for  administration  of  estate  of  deceased  partner  by  creditors  of  the  firm, 
598 
by  separate  creditors  of  deceased  partner,  614,  et  seq. 
legatees,  614  et  seq 
next  of  kin,  614  ctseq. 

4.  between  partners 

when  court  will  not  interfere,  464  et  seq. 
for  an  account,  491,  492  et  seq.     See  Account 
for  discovery,  501  et  seq.     See  Discover  v 
for  dissolution,  461,  491,  570.     See  Dissolution. 
should  be  in  the  Chancery  Division,  491 
parties  to,  459,  461  et  seq. 
next  friend  of  lunatic  may  bring,  579 
statement  of  claim  in,  491 
judgment  for,  given  before  the  hearing,  491 

may  be  brought,  although  the  partnership  could  be  wound  up 
under  the  Companies  act,  491 
for  injunction,  538.     See  Injunction 
for  a  receiver,  545.     See  Receiver 
for  specific  performance.     See  Specific  Performance 
for  fraud  and  misrepresentation,  479  et  seq.,  481 
for  rescission  of  contract,  482 
for  recovery  of  real  property,  560 
goods,  560 
damages,  561 
general  rule  that  one  partner  could  not  sue  another  at  law,  567 
when  an  action  at  law  would  lie,  562 
on  agreements  for  partnership,  559 
account,  560  and  note  (k) 
for  money  paid  by  mistake  in  accounts,  566 
on  agreement  to  indemnify,  566 
ejectment,  279,  562 
trespass,  562 
trover,  562 
covenant,  563 
assumpsit  or  debt 

for  breach  of  express  agreement,  280,  559,  563 
for  not  furnishing  capital,  &c,  563 
for  not  contributing  to  expenses,  564 
for  not  indemnifying  co-partner,  566 


826  INDEX. 

[The  paging  refers  to  the  [*]  pages.] 
ACTIONS— continued. 

4.  between  partners — continued. 

for  not  accounting  to  co- partner  for  money  received  to  his  use, 
566 

on  an  award,  564 

for  balance  of  account,  564 

on  bills  and  notes,  565.     See  Bills 

for  penalty  on  breach  of  agreement,  563 

for  rent,  565 

for  contribution,  566.     See  Contribution 

for  amount  of  valuation,  564 

for  money  had  and  received  for  the  use  of  the  firm,  567 

for  the  recovery  of  deposit  agreed  to  be  paid,  559 
back  of  deposit,  559 

for  share  of  the  produce  of  sale,  568 

for  share  of  surplus  on  dissolution.  569 

for  matters  unconnected  with  partnership  business,  564 
between  two  firms  with  a  common  partner,  267,  569 
between  a  partner  and  his  own  firm,  115,  267,  471  et  seg. 
between  persons  who  have  agreed  to  become  partners,  559 
by  and  agaiust  trustee  of  bankrupt  partner,  288,  289 
for  administration  of  estate  of  deceased  partner.     See  ADMINISTRA- 
TION 
by  surviving  partners,  591 

5.  miscellaneous 

against  sheriff  for  share  of  produce  of  sale  of  partnership  firm,  568 
for  misrepresentation  and  fraud,  479  et  seq. 

ACTORS, 

illegal  partnerships- between,  101 

ACTS  OF  BANKRUPTCY, 
what  are,  625,  626 
relation  back  to,  650,  663 

not  valid  as  bond  fide  dealings,  &c,  with  bankrupt  665.     See  Bank- 
ruptcy 

ADEMPTION, 

of  legacies  of  shares,  620 

ADJUDICATION,  637  et  seq.     See  BANKRUPTCY 
concurrent,  638 
joint  after  separate,  639 

ADMINISTRATION 

of  estate  of  deceased  partner.     See  Deceased  Partner  :  Death 

partner  cannot  prove  in  competition  with  the  creditors  of  the  firm, 

599 
action  for,  by  surviving  partners,  591 
creditors  of  the  firm,  598 

separate  creditors,  legatees,  or  next  of  kin  of  deceased, 
610 
effect  of,  on  rights  of  creditors,  594  et  seq. 
under  order  of  the  court,  594 
of  estates  of  bankrupt  partners.     See  Bankruptcy 

ADMINISTRATOR.     See  Executor 

ADMISSIONS 

may  be  shown  to  have  been  mistaken,  Newton  v.  Belcher,  12  Q.  B.  921 

and  Newton  v.  Liddiard,  ib.,  925 
of  person  that  he  is  a  partner,  not  conclusive,  87,  88 


INDEX.  S27 

[The  paging  refers  to  the  [»]  pages.] 

ADMISSIONS— continued 

of  one  partner  ;  when  evidence  against  co-partner,  128 

when  binding  on  firm,  128 
of  one  co-owner,  effect  of,  128,  note  (?) 

effect  of,  as  regards  payment  into  Court  being  directed,  505 
by  one  partner,  effect  on  Statute  of  Limitations,  261 

ADOPTION 

by  firm  of  losses  not  chargeable  to  it,  388 
See,  also,  Ratification 

ADVANCES 

to  a  firm  by  trustees  after  the  partners  are  changed,  113 
how  distinguished  from  capital,  320 
securities  for,  effect  of  change  in  firm  on,  119 
by  partner,  381 

right  to  reimbursement,  381  etseq. 
interest  on,  390 

effect  of  declining  to  make  further,  550,  note  (a) 
See,  also.  Loans 

ADVENTURE.     See  Partnership 

ADVERTISEMENTS 

evidence  of  partnership,  89 
of  dissolution  of  partnership,  222 
effect  of,  222,  223 
partner  ordered  to  sign,  214 
when  to  be  stamped,  223 
false  representations  by,  action  for,  481 

interfering  with  receiver  by,  contempt  of  Court,  554,  note  (c) 
See,  also.  Notice 

AFFIDAVITS 

of  one  partner  cannot  be  sworn  before  his  co-partner,  117,  note  (h),  624 

AFTER-ACQUIRED  PROPERTY 

covenant  to  assign,  proof  in  respect  of,  in  bankruptcy,  708,  note  (») 
vests  in  trustee  in  bankruptcy,  646 

AGENCY, 

general  doctrines  of 

as  regards  partnerships,  124  ct  seq. 

eftect  of  change  of  firm,  113 
when  a  partner's  agency  commences,  201 
when  it  ends,  210 
as  regards  dormant  partners,  125 
termination  of,  by  notice,  210 
continuing  for  purposes  of  winding  up,  217 
liability  of  persons  sharing  profits,  depends  on,  31 
See,  also,  Agent  ;  Authority  ;  Implied  Powers  ;  Liability 

AGENT, 

each  partner  agent  for  firm,  124 

power  of  partner  to  appoint,  129,  147. 

revocation  of  authority  of,  effect  of,  371. 

ratification  of  acts  of  by  principal,  148,  note  {a),  371 

payment  by  to  principal  when  a  protected  transaction,  665,  note  (r) 

contracts  of,  under  seal,  177 

parol,  177 
duty  of,  to  account  for  profits,  305  et  seq.,  307,  note  (r). 
exceeding  his  authority,  liability  of,  192,  370 
acting  without  authority,  371,  372 


828  INDEX. 

[The  paging  refers  to  the  [*]  pages.] 
AGENT— continued. 

of  firm,  to  whom  to  account,  288,  note  (y) 

right  of,  to  idemnity  from  his  principal,  369.     See  Indemnity. 
liability  of,  for  acts  done  for  non-existent  principal,  163,  168 
liability  of  principal  for  torts  and  frauds  of,  149 
for  foreign  principals  usually  contracts  as  principal,  288,  note  (y) 
sharing  profits,  not  necessarily  a  partner,  35 
See.  also,  Agency  ;  Authority  ;  Implied  Powers  :  Liability 

AGREEMENT 

whether  a  partnership  or  not  depends  on  intention  of  parties,  10 
for  partnership,  see  Contents,  Book  I.,  chap.  1 

unconcluded,  19 

proof  of,  80  et  seq 

action  on,  559 

part  performance  of,  83 

specific  performance  of,  475 

laches  a  defence  to  an  action  to  enforce,  467 

rescission  of,  for  fraud,  479  et  seq 

proof  by  one  party  to,  against  another  in  the  event  of  bankruptcy, 
727,  738 
between  partners 

determines  what  is  partnership  property,  329 

may  be  evidence  of  a  partnership,  89 

how  far  it  affects  third  parties,  168  et  seq. 

construction  of,  see  Articles  of  Partnership 

not  to  carry  on  trade  or  business,  enforced  when,  437 

articles  of  partnership  may  be  waived  by  tacit,  408,  409 
for  appointment  of  a  receiver,  550 
See,  also,   Contracts  ;  Rescission  of  Contract  ;  Specific  Per- 
formance ;  Consideration 

ALIEN 

partners,  72 
enemies,  72 

who  are,  72,  73 
liability  of,  to  bankruptcy  law,  624,  note  (re) 

ALLOWANCE, 

bankrupt's,  753 

ALLOWANCES, 

in  respect  of 

trouble,  extra  work,  &c,  380 

to  executors  and  surviving  partners,  592 
treating  customers,  380,  note  (re),  384 
outlays  generally,  381   et  seq. 
money  paid  in  discharge  of  debts,  382 
useless  expenses,  382 
Indian,  381 

services  performed  after  dissolution,  381 
unauthorized  outlays,  383 
charges  for  valuation,  384 
outlays  on  the  property  of  one  partner,  384 

expenses  incurred  for  firm,  but  not  charged  to  it  in  previous  ac- 
count, 383 
unexplained  expenses,  384 
secret  service  money,  384 

advances  generally,  381  et  seq.     See  ADVANCES 
liabilities  and  losses,  385 
losses  attributable  to  one  partner  only,  387 


INDEX.  829 

[The  paging  refers  to  the  [*]  pages.  ] 
ALLOWANCES— contin  tied. 

in  respect  of — continued. 

losses  attributable  to  misconduct  or  negligence,  387 

illegal  acts,  377,  378 
interest,  389 

agreements  as  to,  418 
just,  380  etseg.,  519 
See  Contribution  ;  Indemnity 

AMALGAMATION 

effect  of,  on  sureties,  118 
on  securities,  119 
See  Change  in  Firm 

AMBASSADOR 

cannot  be  sued  in  respect  of  commercial  transactions,  72 

ANNUAL 

accounts,  effect  of  not  taking,  430  et  seq. 

ANNUITY 

in  lieu  of  profits,  or  out  of  profits,  28,  36 
to  widow,  agreements  as  to,  435 

ANNULLING 

adjudications  of  bankruptcy,  642.     See  BANKRUPTCY 
on  equitable  grounds,  636,  note  (a;) 
effect  of,  645 

ANSWER  IN  CHANCERY, 

evidence  of  partnership  by,  89 
denying  partnership,  507 

discovery  when  partnership  was  denied  in,  507 
See  Payment  into  Court 

APOTHECARIES, 

partnership  between  unqualified,  98,  99,  note  (p) 

APPEARANCE, 

how  entered,  266 

one  partner  can  authorise  entry  of,  on  behalf  of  firm,  271,  note  (y) 

APPLICATION  OF  MONEY, 

firm  not  liable  for  money  because  it  has  had  the  benefit  of  it,  189 
exceptions,  191 

APPOINTMENT, 

held  by  firm,  effect  of  change  of  partners  on,  114 
held  by  one  partner 

official,  414 

agreements  as  to,  414 

valuation  of,  on  dissolution,  558 

when  assets,  331 
of  successor  in  firm,  434 
when  partnership  property,  331 

APPORTIONMENT 

of  premiums,  64 — 69 
of  dividends,  621 
of  profits,  621 

APPRENTICES, 

discharge  of,  on  change  in  firm  to  which  they  are  bound,  117,  note  (k) 


830  INDEX. 

[The  paging  refers  to  the  [*]  pages.] 
APPROPRIATION  OF  PAYMENTS, 
generally,  229—236 
discharge  of  retired  partner  by,  229 

estate  of  deceased  partner  by,  229 

dormant  partner  by,  229 

surety  by,  230 
■where  one  partner  pays  his  own  debt  with  monies  of  firm,  225 
where  there  is  a  single  current  account,  230 
where  there  are  several  distinct  accounts,  231 
where  dividend  is  paid  on  several  debts,  how  applied,  228,  235 
cases  in  which  rule  applicable  to  single  accounts  does  not  apply,  231 
against  debtors  as  well  as  creditor,  230 
effect  on  incoming  partners,  230 
where  debts  owing  to  firm  and  member  of  it,  236 
in  cases  of  fraud,  235,  236 

APPROPRIATION  OF  SECURITIES, 

in  case  of  bankruptcy,  714,  720,  note  (n) 

ARBITRATION, 

staying  actions,  &c,  after  agreement  to  refer,  453 
power  of  partner  to  bind  firm  by  submission  to,  129,  272 
ratification  of  submission  to  by  co-partners,  129 
effect  of  agreement  for,  on  action  for  account,  514 
'   dissolution  of  partnership  by,  454,  572,  note  (n) 
usual  clauses  relating  to,  451 

clause  in  articles  as  to,  applies  to  partnership  continued  alter  expiration 
of  term,  411 
See  Award 

ARBITRATOR, 

power  of,  on  general  submission,  454 
cannot  appoint  receiver,  454 

ARRANGEMENT 

by  firm  with  its  creditors  under  Bankruptcy  act,  1883,  754  et  seq. 
void  if  not  registered,  756 

ARREST 

for  debt,  effect  of,  238 

ARTICLES  OF  PARTNERSHIP, 

illegal  clauses  in,  do  not  necessarily  make  the  partnership  illegal,  91 

proof  of,  not  essential  to  establish  a  partnership,  87 

to  be  drawn  up,  22,  412 

effect  of  retrospective,  88,  412 

effect  of  deferring  execution  of,  as  regards  creditors,  202 

not  dating,  412 

actions  for  breaches  of,  559 

specific  performance  of  clauses  in,  475  et  seq.     See  Specific  PerfoRv 

MANCE. 

general  rules  for  construing,  406  et  seq. 

not  intended  to  define  all  the  rights  and  duties  of  partners,  406 

to  be  construed  with  reference  to  object  of  partners,  407 

and  so  as  to  defeat  fraud,  407 

and  the  taking  of  unfair  advantages,  408 

provisions  in,  may  be  tacitly  waived,  408 

extend  to  partnership  continued  after  the  time  fixed  for  determina- 
tion, 410,  411 
variation  of,  409 
remarks  on  clauses  in,  406 

usual  clauses,  411  el  seq. 


INDEX  831 

[The  paging  refers  to  the  [*]  pages.  ] 
ARTICLES  OF  PARTNERSHIP— continued. 
remarks  on  clauses  in — continued. 
nature  of  the  business,  412 
place  of  business,  412 
commencement  of  the  partnership,  412 
future  formal  articles,  413 
name  or  style  of  firm.  413 
duration  of  the  partnership,  413 
premiums,  413 
property  of  the  firm,  414 
capital  of  firm.  320,  414  et  seq. 
appointments  held  by  partners,  414 
prohibitions  against  carrying  on  business,  436 

after  sale  of  the  business,  437 
deeds  and  papers  in  the  custody  of  firm  of  solicitors,  438 
good-will,  415,  439  et  seq. 
bringing  in  debts  as  capital,  417 
getting  in  debts  on  dissolution,  44b 

assignment  ot  share  of  outgoing  or  deceased  partner,  &c,  449 
indemnity  to  be  given  by  continuing  to  outgoing  partner,  &c,  450 
effect  on  lien,  451 

reference  of  disputes  to  arbitration,  451  et  seq. 
penalties  and  liquidated  damages,  454 
trade  secrets,  &c,  415 
patents,  415 
inventions,  415 
amount  of  debts,  417 
guarantee  against  debts,  418 
allowances,  418 
interest,  418 

monies  to  be  drawn  out,  418 
expenses  to  be  charged  to  the  firm,  418 
conduct  of  partners,  418 

effect  of  covenant  to  be  true  and  just,  &c,  418 
servants,  419, 

attention  to  be  given  to  business,  419 
powers  of  majority,  419 

powers  of  one  partner  by  agreement,  418,  419 
partnership  books,  420 
solicitor's  papers,  438 
mode  of  taking  accounts,  420 
effect  of  not  keeping  accounts  as  agreed,  430 
conclusiveness  of  settled  accounts,  420,  421 
retiring  from  firm,  422 
sale  of  share,  422,  423 

offer  of  share  to  co-partner,  and  purchase  by  him,  423  et  seq 
dissolution,  425 
premiums,  return  of,  66,  413 
insolvency  of  member,  425 
insanity  of  member,  425 
notices  of  dissolution,  425,  426 
expulsion,  426  et  seq. 
valuation  of  share,  429  ex  seq. 
methods  of  avoiding  sale,  429 
introduction  of  new  partners,  433  ex  seq. 
settled  share,  434 

transmission  of  share  to  non-partners,  433 
annuities  to  widows,  &c,  435 


832  INDEX. 

[The  paging  refers  to  the  [*]  pages.  ] 
ASSETS 

of  firm,  what  are,  320,  322.     See  Property 
good-will  included  in,  443 
distributable  pari  passu,  709 

except  in  cases  mentioned,  709,  note  (z) 
ot  deceased  partner,   effect  of  continuing  them  in  the  partnership  busi- 
ness, 606,  614  ex  seq. 
liability  of  to  creditors  of  firm,  594  &c. 
for  acts  of  executor,  606.  609 
proof  by  bankrupt  executor  for,  when  allowed,  608 
where  improperly  left  in  business,  608,  724 
properly  left  in  business,  608,  722 
See,  also,  Administration  ;  Bankruptcy  ;  Deceased  Part- 
ner; Death 
ASSIGNEES  IN  BANKRUPTCY.    See  Trustee  in  Bankruptcy 

ASSIGNMENT 
of  debt, 

effect  of,  as  regards  set-off,  296 

notice  of,  necessary  to  take  it  out  of  the  reputed  ownership  of  the 

assignor,  679 
how  to  be  made  since  the  Judicature  act,  285 
of  share  in  partnership,  363 
stamp  on,  450 

difference  between  and  release,  450 
effect  of,  as  regards  dissolution,  583 
position  of  assignee,  363  et  seq. 
right  of  assignee  to  an  account,  364,  493 

to  a  dissolution,  584 
by  outgoing  to  continuing  partner,  449 
of  property,  when  an  act  of  bankruptcy,  627 
right  of  solvent  partners  to  make,  671 

See  Shares;  Transfer  of  Shares 

ASSUMED  NAME, 

trading  under,  not  illegal,  92 

ASSUMING 

to  act  as  corporation,  93 

ATTACHMENT 

of  debts,  299 

ATTORNEY.     See  Solicitors. 

powers  of,  to  draw  bills,  effect  of,  130 

warrant  of,  given  by  one  partner,  272 
AUCTION, 

share  of  bankrupt  partner  need  not  be  by,  649,  note  (s) 
debtor  under  fi.  fa.  358 

AUTHOR  AND  PUBLISHER, 

partners  in  profits  only,  14 
partnerships  between,  duration  of,  122 
liability  of,  creditors,  179,  203 
powers  of,  to  make  purchases,  144 

AUTHORITY 

to  hold  out  as  partner,  42,  43 

of  one  partner  to  act  for  firm,  124  et  seq. 

where  change  in  the  firm,  113 
of  dormant  partner,  125 
in  cases  of  extraordinary  necessity,  126 


INDEX.  833 

[The  paging  refers  to  the  [*]  pages.  ] 
AUTHORITY— continued. 

revocation  of,  effect  of,  371 

misrepresentation  of,  481  note  (p) 

oi  one  partner,  liability  of  firm  for  untrue  statements  as  to,  165,  166 

excess  of,  effect  of  notice  of,  167,  168,  176 

liability  of  agent  in  cases  of,  163,  167,  192 
See  Agency;  Agents;  Implied  Powers 
AWARD, 

money  awarded  to  one  partner,  when  it  does  not  belong  to  firm,  325 
dissolving  partnership,  authorised  by  general  admission  to  arbitration, 

426,  454 
disposing  of  business,  effect  of,  442 
a  defence  to  an  action  for  account,  514,  515 
mistakes  in,  when  set  right,  514 
See  Arbitration 

BAILIFF, 

to  distrain,  appointment  of,  by  one  partner,  137 

BALANCE, 

of  account,  action  by  one  partner  against  another  for,  564 
in  hands  of  partner,  interest  on,  390 

BANK  NOTES, 

issue  of,  96  note  (2) 

BANK  OF  ENGLAND, 

privileges  of,  96  note  (z) 

BANKERS, 

illegal  partnerships  between,  95  et  seq. 

returns  to  be  made  by,  95 

issue  of  notes  by,  96  note  (z) 

number  of  persons  who  may  be  in  partnership  as,  96 

books,  production  of,  on  action  for  account,  537  note  (t) 

liability  of,  for  misapplication  of  money,  152,  158 

account  with,  assent  to  transfer  of,  135 

compound  interest,  when  payable  by,  390  note  (s) 

direction  to,  not  to  pay  cheque  of  firm,  133 

BANKING  ACCOUNT, 

power  of  partner  to  open,  129 
overdrawing,  is  borrowing  money,  132 

BANKING  COMPANIES 

issue  of  notes  by,  96,  note  (2) 

BANKRUPT, 

who  may  be  made,  623,  624 
who  may  make  a  person,  633 
partners 

dormant  partners  may  be,  633,  637 

nominal  partners  may  be,  633,  637 

allowance  to,  75.'! 

need  not  join  in  suing  on  joint  contract,  289 

court  in  bankruptcy  may  restrain  action  against,  289,  718 
companies,  633 

See  Bankruptcy;  Trustees  in  Bankruptcy 

BANKRUPTCY.     See  the  Analysis  of  Contents,  Bk.  IV.  c.  4. 
1.  Generally,  622 

who  may  be  made  bankrupts,  623,  624 
proceedings  against  firms,  623 
*  30  LAW  OF   PARTNERSHIP. 


834  INDEX. 

[The  paging  refers  to  the  [*]  pages.] 

BANKRUPTCY— continued. 

1.  Generally — continued. 

in  firm's  name,  623 
disabilities  of  partners  of  officials  in,  117,  624 
difference  between  traders  and  non-traders  as  to,  624 
as  to  companies,  623 
•what  are  acts  of,  625-633 

time  of  commission  of  act  of,  633 
fraudulent  conveyances,  627,  659 

preferences,  628,  659 
sales  for  present  consideration,  629 
protected  transactions,  630,  654,  665 
petition  for  adjudication  of,  633  et  seq. 

trustee  in,  appointment  and  choice  of,  644  et  seq.     See  Trustee  in 
Bankruptcy 
what  property  he  takes  646,  et  seq. 
land,  651 
chattels,  651 
onerous  property,  651 
books  of  account.  652 
shares,  debts,  goodwill,  &c,  652 
not  trust  property,  652 
benefit  of  contracts,  652 
liability  in  respect  of  contracts,  651  note  (k) 
share  of  profits  made  since,  when,  526 
property  in  reputed  ownership  of  bankrupt,  676 
relation  back  of  title  of  trustee,  663 
appointment  of  inspectors  in,  to  protect  one  class  of  creditors  against 

another,  645 
consequences  of 

dissolves  firm,  577,  649 

trustee  does  not  become  partner,  648 

as  regards  the  bankrupts,  and  their  power  of  dealing  with  the  assets 

of  the  firm,  212,  666  ct  seq. 
as  regards  the  solvent  partners,  and  their  power  of  dealing  with  the 

assets  of  the  firm,  212,  669  et  seq. 
as  regards  execution  creditors,  674 
where  some  partners  are  abroad,  675 

as  regards  agreements  between  partners  affecting  their  property,  335 
as  regards  avoidance  of  voluntary  settlements,  654 
share  of  bankrupt  how  ascertained,  649 
power  of  one  partner  to  act  for  firm  in  proceedings  in,  624 
actions  by  and  against  partners  in  cases  of,  283,  289 
return  of  premiums  in  event  of,  65,  67 

holding  out  after  bankruptcy  of  one  partner,  effect  of,  212,  700 
2.  Adjudication  of  bankruptcy 
persons  liable  to,  624 

what  acts  are  necessary  to  sustain,  625  et  seq. 
time  within  which  it  must  be  obtained,  628 
petition  for,  625,  633  et  seq. 

who  may  petition  for,  633 

amount  of  petitioning  creditor's  debt,  634 

nature  of  petitioning  creditor's  debt,  634 

circumstances  precluding  petition,  634 

effect  of  death  of  partner,  638 

common  partners,  837,  641 

by  one  partner  against  another,  635 

where  improper,  636 


INDEX.  835 

[The  paging  refers  to  the  [*  1  pages.] 
BANKRUPTCY— continued. 

2.  Adjudication  of  bankruptcy — continued. 

creditor  of  firm  may  obtain  a  separate  adjudication  against  one  part- 
ner, 637 

by  creditor  whose  debt  is  merged,  257 
joint,  what  will  sustain,  632,  637 

choice  of  trustee  under,  644 

appointment  ot  inspector?  under,  645 

dormant  or  nominal  partner  may  be  included  in,  633,  637 

made  against  partners  individually,  623 
annulling  and  superseding 

causes  for,  637 — 641 

consequences  of,  643 

costs  of,  642 

staying  proceedings  instead  of,  642 

after  certificate,  642 

legality  of,  642 
consolidation  of  separate  adjudications  643 
prosecution  of  joint  and  separate  in  same  court,  644,  note  (r) 
concurrent  adjudications,  638 

in  England  and  Ireland,  640 
several  adjudications  against  same  person,  639 

3.  Administration  of  partners'  estates  in,  691  et  seq. 

general  principle  that  each  estate  shall  pay  its  own  creditors,  692 

distinct  accounts  of  joint  and  of  separate  estates  to  be  kept,  693 

joint  and  separate  dividends  to  be  declared  together,  693 

where  connected  firms,  693 

costs  of,  how  payable,  694 

remuneration  of  trustee  in,  694 

correcting  mistakes  as  to,  695,  746 

agreement  converting  joint  into  separate  estate,  et  vice  versd,  698 

effect  of  doctrine  of  reputed  ownership,  700 

of  holding  out  as  partner,  700 
joint  and  separate  debts,  what  are,  701 
bill  accepted  after  bankruptcy,  673 
consolidation  of  the  joint  and  of  the  separate  estates,  695 

4.  Administration  of  the  joint  estate,  697,  720  et  seq. 

joint  creditors  to  be  first  paid  out  of  the  joint  estate,  692,  720 
rights  of  executors  of  deceased  partner,  as  regards,  722 
two  firms  with  common  partner,  724 
proof  by  separate  creditors  against  joint  estate,  allowed 

in  cases  of  fraud,  725 

where  there  are  distinct  trades.  725 

where  partner  has  obtained  order  of  discharge  and  become  cred- 
itor, 725 
surplus  of  joint  estate,  how  to  be  dealt  with,  728,  742 

5.  Administration  of  the  separate  estates,  692,  729 

separate  creditors  of  each  partner  to  be  first  paid  out  of  his  separate 

estate,  692,  729 
proof  by  joint  creditors  against  a  separate  estate,  allowed 

where  there  is  no  joint  estate,  731 

where  no  solvent  ostensible  partner,  731 

although  one  partner  dead,  solvent,  732 

joint  estate  very  small,  732 

in  cases  of  fraud,  733 

where  there  are  distinct  trades,  736 

in  favour  of  petitioning  creditor  himself,  731,  note  (w) 
surplus  of  separate  estates,  bow  to  be  dealt  with,  730 
proof  by  partners  against  each  other's  separate  estates,  737 


836  INDEX. 

[The  paging  refers  to  the  [*]  pages.  ] 
BANKRUPTCY— continued. 

not  allowed  to  the  prejudice  of  joint  creditors,  737,  740 
where  partner  has  paid  joint  debts,  741 

by  person  who  has  held  himself  out  as  a  partner,  742,  note  (b) 
in  eases  of  fraud,  739 
where  there  are  no  joint  creditors,  740 
proof  for  what  is  not  satisfied  by  lien,  741 
proof  by  company  against  estate  of  bankrupt  shareholder,  739 
election  by  joint  and  separate  creditors,  743 
double  proof,  719,  743,  747 

position  of  petitioning  creditor,  747 
statutory  enactment  as  to,  748 
splitting  demands,  749 
6.  Proof  of  debts  in 

general  rules  as  to,  707 
what  debts  may  be  proved,  707,  708 
equitable  securities,  715 
in  respect  of  torts  when,  708,  note  (y) 
indemnity,  708,  note  (y) 
breaches  of  trust,  707,  and  note  (t) 
by  cestui  que  trust,  717 

by  bankrupt  in  respect  of  trust  property,  707 
by  secured  creditors,  709,  714 

where  secured  bills,  709,  710 
where  drawer  bankrupt,  710,  711 

acceptor  bankrupt,  711 
where  both  drawer  and  acceptor  bankrupt,  712  ■ 
effect  of  rule  in  Wearing1  s  case  on,  712 
application  of  rule,  713 

position  of  holder  of  bills,  711 
by  executors  of  deceased  partner  against  survivors,  722 
by  solvent  partners  against  estate  of  co-partner,  721,  737,  740 
by  public  officer,  740 

by  company  against  estate  of  bankrupt  shareholder,  739 
against  joint  estates.  720 
against  separate  estates,  729 
against  both  estates,  743 
rule  as  to  election,  743 
where  double  proof  is  allowed,  747 
splitting  demands,  749 
where  there  is  no  joint  estate,  731 
mutual  credits.     See  Set-off 
rule  that  creditor  cannot  sue  and  prove,  718 

creditor  may  proveagainst  bankrupt  partner  and  sue  solvent  partners,  257 
marshalling,  effect  of  on,  717,  718 
interest  on,  719.  720 

where  foreign  adjudication,  719  , 

composition  in,  effect  of  as  regards  joint  debt,  238 
discharge  of  bankrupt,  effect  of   on,  752 
Bankruptcy  of  shareholders 

company  how  far  dissolved  by,  649,  650 
shares  of,  vest  in  trustee  on,  652 
Bankrupt's  order  of  discharge,  751  et  seq. 

allowance,  753 
Arrangements  with  creditors,  754  et  seq. 
BANKRUPT  PARTNERS 

cannot  deal  with  property  of  firm,  666 
payments  made  to,  668 
See  Bankruptcy 


INDEX.  S37 

[The  paging  refers  to  the  [«]  pages.] 
BENEFIT 

of  money,  effect  of  having  had,  189  et  seq. 
of  contract,  189 

liability  of  firm  for,  in  equity,  191 
proof  against  joint  estate  in  respect  of,  when,  703 
resulting  to  one  partner  from  connection  with  firm,  309,  310 

BEQUEST.     See  Legacy 

BILLS- OF  ACCOUNT, 

evidencing  partnership,  89 
BILLS  OF  EXCHANGE, 

proof  of  partnership  by  means  of,  89 
issue  of,  by  bankers,  96  note 

do  not  merge  debt  to  secure  which  they  are  given,  254,  704 
power  of  one  partner  to  bind  firm  by,  129,  130 
when  given  for  his  own  private  debt,  171 
when  given  after  dissolution,  210 — 214 
authority  to  transfer,  131 
to  indorse  in  name  in  which  it  is  drawn,  131 
to  accept  in  blank,  131 

one  partner  taking,  in  satisfaction  of  debt,  136 
drawn  by  one  partner  on  firm,  effect  of,  116 

firm  on  another  where  common  partners,  115 
for  old  debt,  a  fraud  on  new  partner,  209 
in  name  of  firm  after  bankruptcy,  673 
payable  to  officer  for  time  being,  180,  note  (a) 
accepted  for  honor,  274 
acceptance  of,  need  not  be  signed,  186 

of  firm,  undertaking  of  one  partner  to  provide  for,  when  due,  139 
negotiation  of,  by  partners  who  have  committed  acts  of  bankruptcy,  667, 
673 
by  solvent  partners  where  their  co-partner  is  bankrupt 
674 
one  partner  has  no  power  to  guarantee  payment  of,  on  account  of  firm.  1 38 
injunction  to  restrain  negotiation  of,  542 
who  liable  on,  180  et  seq. 
effect  of  form  of,  180 

when  name  of  firm  is  on  them,  171, 173.  180 
when  name  of  firm  is  not  on  them,  184 
where  two  firms  with  same  name,  181  et  seq. 
where  name  of  firm  same  as  individual,  189 
mistake  in  name,  effect  of,  185 
liability  of  incoming  partner  for  bills  accepted  by  co-partners  for  old  debt 

209 
proof  against  joint  estate  in  respect  of  what,  702 
secured  by  charge  on  goods,  709  et  seq. 
rights  of  drawer  and  acceptor,  710 
right  of  holder,  711 
effect  of  bankruptcy  of  drawer  on,  710,  711 

of  acceptor,  711 
rule  in  Ex  parte  Waring,  712 
effect  of,  713 
given  by  continuing  partner  for  old  debt,  effect  of,  242  et  seq. 
actions  by  partners  on,  274 

action  by  one  partner  against  another  for  not  taking  up,  566 
action  by  one  partner  against  another  on,  565,  567 
set-off  in  bankruptcy  in  respect  of.  656,  657 
buying  up,  to  avoid  set-off  in  bankruptcy,  663 
See,  also,  Promissory  Notes 


838  INDEX. 

[The  paging  refers  to  the  [*]  pages.] 
BILLS  OF  EXCHANGE  ACT,  131,  180,  181 

BILLS  OF  SALE  ACTS, 

effect  of,  on  transactions  between  executors  of  deceased  partner  and  sur- 
viving partners,  593,  note  (r) 
as  regards  property  vesting  in  trustee  in  bankruptcy,  651,  note  (I), 

679 
on  doctrine  of  reputed  ownership,  679 
BLOCKADE, 

partnership  for  running,  not  illegal,  92 

BONA  NOTABILIA. 

shares  in  partnerships  are;  340 
BOND, 

implied  power  of  partner  as  to,  131,  137 

merges  simple  contract  debt,  256,  703 
BONUSES, 

right  of  legatee  of  shares  to,  621,  note  (u) 
BOOK  DEBTS, 

of  bankrupt  partner  may  be  sold  by  trustee,  652 
BOOKS. 

duty  of  partners  to  keep  proper,  404 
to  allow  them  to  be  inspected,  404 

agreements  as  to  custody  of  partnership,  420 
specific  performance  of,  479 

delivery  of,  to  receiver,  554 

entries  in,  are  evidence  against  all  the  partners,  536 

production  of,  in  actions  for  account,  501  et  seq.,  537 

production  of  bankers,  537,  note  (t) 

effect  of  withholding,  on  taking  accounts,  405,  538 

right  of  trustee  of  bankrupt  partner  to,  652 
See  further,  Accounts  ;  Inspection 

BORROWING  MONEY, 

power  of  one  partner  to  bind  firm  by,  131 

in  case  of  urgent  necessity,  126,  131 

from  trustees,  162 
distinction  between  and  getting  things  on  credit,  133 
distinction  between  and  increasing  capital,  132,  133,  321 
effect  of  having  had  benefit  of,  189,  et  seq. 

BOVILLS  ACT,  35  et  seq. 

BREACH  OF  TRUST, 

liability  for,  joint  and  several,  161,  162,  198,  199,  200,  702 
by  one  partner,  liability  of  firm  for,  199 
liability  of  estate  of  deceased  partner  for,  596 
following  money.  162,  521  et  seq. 
notice  of,  effect  of,  143 

notice  of,  by  one  partner,  when  not  notice  to  firm,  142 
by  not  getting  in  share  of  deceased  partner,  614 
effect  of  lapse  of  time  on,  260 

remedy  for,  when  barred  by  Statute  of  Limitations,  260,  511 
proof  in  bankruptcy,  in  respect  of,  702,  707,  and  note  (t),  717 
double  proof  for,  745,  749 
assets  brought  in  in,  not  joint  estate,  724 
See  Trustee  ;  Trusts 

BROKERS, 

partnership  between  unqualified,  97 
discovery  by,  97 


INDEX.  839 

[The  paging  refers  to  the  [*]  pages.] 
BUBBLE  ACT,  THE,  101 

BUILDING  SOCIETIES, 

members  of,  sharing  profits  not  prima  facie  partners,  12,  note  (m) 

BUILDINGS 

on  partnership  property,  330,  331 

BUSINESS, 

of  partnership,  limits  the  authority  of  a  partner  to  act  for  firm,  124  el  seq. 
right  to  transact,  301 

unless  otherwise  agreed,  10,  302 
agreement  not  to  carry  on,  436 

when  implied,  442 

specific  performance  of,  437,  and  note  (o) 
vendor  and  purchaser  of,  when  partners,  28 
power  of  partner  to  extend,  137 

to  alter,  315,  316 
untrue  statements  as  to  nature  of,  liability  for,  166 
effect  of  selling  on  right  to  carry  on,  440,  441 
effect  of  award  disposing  of,  442 
of  partnership,  agreements  as  to,  412 
profits  of  distinct,  how  far  to  be  accounted  for,  310-313 
place  of,  power  of  majority  to  decide  upon,  315 
carried  on  abroad,  income  tax  when  payable  for,  394,  note  (c) 
refusal  to  meet  on  matters  of,  ground  for  dissolution,  581 
hopeless  state  of,  ground  for  dissolution,  576 

See  Goodwill 

CALLS, 

proof  for  future,  in  bankruptcy,  708,  note  (w) 

CANCELLATION 

See  Rescission  of  Contract 

CAPACITY  OF  PARTNERS,  71 
infants,  74 
lunatics,  76 
married  women,  77 
corporations,  78 
companies,  78 
aliens,  72 
felons,  73 
outlaws,  73 

CAPIAS.     See  Execution. 

CAPITAL 

generally,  320 

how  distinguished  from  advances,  320 

action  by  one  partner  against  another  for  not  contributing,  563 

of  the  firm,  agreements  as  to,  414 

interest  on,  389 

when  payable  out  by  instalments,  390,  note  (o) 
bequest  of  partners,  what  it  passes,  619 
increasing  capital,  132,  321 
loss  of,  ground  for  dissolution.  576 
continued  employment  of,  521  et  seq 
losses  of,  how  shared,  349 
paying  profits  out  of,  394,  note  (e) 
withdrawing,  321 
should  be  money,  415 


840  INDEX. 

[The  paging  refers  to  the  [*]  pages.] 
CARRIERS, 

actions  against,  281,  282 
co-partners  need  not  be  joined,  282 
notice  to  one  of  a  firm  of,  effect  of,  143 

CARTS, 

names  on,  evidence  of  partnership,  89 
CERTIFICATE, 

staying  bankrupt's,  until  partnership  accounts  are  taken,  752,  note  (s) 

annulling  adjudication  after  grant  of.  642 
See  Bankruptcy  ;  Order  of  Discharge 

CESTUI  QUE  TRUST, 

liability  of,  to  indemnify  trustee,  373  et  seq. 
proof  by,  in  bankruptcy  of  trustee,  717 
how  far  right  of  double  proof,  745,  749 
of  partner's  share  not  a  partner,  584 
rights  of  against  executors  of  deceased  partners,  614 
See.  too,  Breach  of  Trust 

CHAMBERS.    See  Originating  Summons 

CHANCERY  DIVISION. 

transfer  of  proceedings  to,  when  necessary,  598 
actions  between  partners  should  be  brought  in,  491 

CHANGE  IN  CONSTITUTION.     See  Majority 
one  dissentient  can  forbid,  315 

CHANGE  IN  FIRM, 
effect  of,  113 

on  sureties,  117 

on  securities,  117 

on  equitable  mortgages,  119 

on  lien  of  solicitors,  120 

on  actions  by  and  against  it,  284 

as  regards  set-off,  291,  296 

on  property  of  firm,  336 

CHARGE  OF  DEBTS 

on  estate  of  deceased  partner,  effect  of,  260 

CHARITABLE  USES  ACT, 

share  of  partner  in  partnership  assets  within,  348 

CHATTELS  REAL, 

not  within  the  doctrines  of  reputed  ownership,  678 

CHEMISTS  AND  DRUGGISTS, 

partnership  between  unqualified,  98,  note  (I) 

CHEQUES, 

firm  bound  by,  though  drawn  by  one  partner,  133 

if  not  post-dated,  133 

direction  by  partner  to  bankers  not  to  pay,  effect  of,  133 

of  directors,  133,  note  (d) 

CHOSES  IN  ACTION, 

application  of  doctrine  of  reputed  ownership  to,  678 

shares  are,  678,  note  (k) 

debentures  are,  678 

devolve  on  surviving  partners,  341 

CIRCULARS, 

evidence  of  partnership,  89 
notice  of  dissolution  by,  222,  223 


INDEX.  841 

[The  paging  refers  to  the  [»]  pages.] 
CLERGY, 

may  be  partners,  71 

CLERKS, 

notice  to,  effect  on  firm,  143 
sharing  profits,  when  partners,  13 

CLUBS, 

not  partnerships,  50 

can  be  wound  up  under  the  Companies  act,  1862,  50,  note  (?') 

need  not  be  registered  under,  50 

liability  of  managers  of,  45 

interference  in  internal  regulations  of  by  Court,  466 

COACH  OWNERS, 

partners  in  profits  only,  13 
liability  of,  for  each  other's  negligence,  149 
for  fodder,  &c. ,  179 

CODE  CIVIL, 

definition  of  partnership  in,  2 

COGNOVIT, 

given  by  one  partner,  272 

COLLIERY.     See  Mines 

COLLUSION, 

by  one  partner,  effect  of  as  regards  co-partner,  267,  279 
effect  of,   as  regards  rescission  of  agreements  between  executors  of  de- 
ceased and  surviving  partners,  488 
releases  given  by,  145,  146 

COLONIAL  JUDGMENT, 

does  not  merge  debt  for  which  it  is  obtained,  255,  note  (s) 

COMMENCEMENT, 

of  partnership,  20  et  seq. 

presumptive  date  of,  201  et  seq.,  412 

agreements  as  to,  412 
of  liability  of  partners  for  each  other's  acts,  201  et  seq. 

COMMISSION, 

effect  of  dividing,  between  partners,  28 

of  bankruptcy.     See  Bankruptcy 

duty  of  partner  to  account  to  firm  for,  307,  note  (r),  309,  note  (6) 

partners  cannot  charge,  380 

COMMITTEE, 

of  lunatic  partner,  578 

exercising  right  of  pre-emption,  578,  note  (wt) 

COMMON  LAW, 

legality  of  companies  at,  101 

extent  of  liability  of  partners  at,  200 

actions  by  one  partner  against  co-partner,  562,  &c.     See  Action 

COMMON  PARTNER.     See  Connected  Firms 
actions  between  firms  with,  267,  569 
adjudications  of  bankruptcy  incases  where,  638,  641 
creditors  of  firms  with,  how  treated  on  bankruptcy,  696 
proof  of  debts  against  firms  with,  724 

COMMON  STOCK, 

not  essential  to  partnership,  12,  13 


842  INDEX. 

[The  paging  refers  to  tlie  [*]  pages.  ] 
COMMUNITY 
of  loss,  10 
of  profit,  12.     See  Partnership  ;  Profits  ;  Losses 

COMPANIES. 

distinguished  from  partnerships  and  corporations,  4,  5 

incorporated,  5 

unincorporated,  5 

illegal.     See  Illegal  Partnerships 

promoters  of,  not  partners,  23,  24 

subscribers  to  inchoate,  not  partners,  24 

banking,  95,  96,  and  note  (z) 

may  be  partners,  78 

may  be  petitioning  creditors,  633 

when  subject  to  bankruptcy  law,  623 

whether  dissolved  by  bankruptcy  of  members,  649 

proof  of  debts  by,  707 

proof  by  against  estate  of  shareholder,  739 

COMPANIES  ACT,  1862, 

club  need  not  be  registered  under,  50 

may  be  wound  up  under,  50,  note  (i) 

COMPETITION, 

by  one  partner  with  firm  not  allowed,  312 
remedy  of  partners  in  case  of,  312 

COMPENSATION 

for  trouble,  380.     See  Contribution 

COMPOSITIONS  IN  BANKRUPTCY, 
generally,  754 
joint,  effect  of,  on  separate  liability,  238 
relation  back  of  trustee's  title  in,  755 
registration  of,  756 

COMPOUND  INTEREST 

in  case  of  bankers  when  payable,  390,  note  (s) 
liability  to  account  for,  531.     See  Interest 

COMPROMISE, 

power  of  one  partner  to  bind  firm  by,  136 

CONCEALING  NAME 

and  yet  holding  out,  42 

CONCEALMENT. 

when  a  fraud,  480,  and  note  (m) 

of  firm  name,  effect  of,  on  doctrine  of  holding  out,  45 

CONDITIONAL 

offer  to  take  shares,  24 

CONDITIONS, 

what  are  precedent  and  whatnot,  416 

contracts  of  partnership  on,  20  et  seq. 

in  partnership  articles.     See  Articles  of  Partnership 

CONDUCT 

of  partners,  agreements  as  to,  418 

effect  of  as  regards  rights  of  co-partners,  116,  117,  267 — 270 
See  also  Holding  Out 
misconduct  when  a  ground  for  dissolution,  466,  580.     See  Injunction; 

Dissolution 
of  proceedings,  where  joint  and  separate  creditors  actions,  598,  note  (n) 


INDEX.  843 

[The  paging  refers  to  the  [*]  pages.  ] 
CONFIDENCE, 

destruction  of,  a  ground  for  dissolution,  580 

CONNECTED  FIRMS.     See  Common  Partner 
actions  between,  267,  569 
notice  to  one  when  notice  to  both,  141 
adjudication  of  bankruptcy  against,  637 
creditors  of,  regarded  as  separate  creditors,  693 
proof  by  one  against  the  other  in  bankruptcy,  724 
double  proof  against,  in  the  event  of  bankruptcy,  748 
action  against,  not  necessarily  multifarious,  603,  604 
liability  of,  on  each  others'  bills,  where  name  is  the  same,  181  et  seq. 

CONSENT 

to  retirement  of  partner  from  firm,  573 
to  transfer  of  share,  363 

necessity  of,  363 

how  given,  364,  365 

CONSIDERATION 

of  a  contract  of  partnership,  63.     Book  I.,  cap.  II. 
of  the  recovery  back  of  premiums,  64 

in  cases  of  fraud,  64 

where  the  consideration  has  failed,  65 

where  no  time  was  fixed  for  the  continuance  of  the  partnership,  66. 
for  discharge  of  old  partner,  242 

CONSOLIDATION.     See  Amalgamation 

of  joint  and  separate  estates  in  bankruptcy,  695 
of  proceedings  in  bankruptcy,  638,  643 

CONSTRUCTION 

of  partnership  articles,  406,  et  seq.     See  Articles  of  Partnership 

CONTEMPLATED 

partnerships,  20  et  seq. 

CONTINUATION  OF  PARTNERSHIP,  121  et  seq. 

effect  of,  on  application  of  partnership  articles,  410,  411 
as  regards  the  duration  of  sub-partnership,  122 

CONTINUING  PARTNERS.     See  Surviving  Partners 

promise  to  look  to,  effect  of  on  discharge  of  retired  partner,  242 
treating  as  sole  debtors,  243 

CONTRACTS 

of  loan,  how  distinguished  from  partnerships,  15  and  Add. 
of  partnership,  10  el  seq.     See  Partnership 
evidence  of,  80  et  seq. 

how  created  and  how  dissolved,  Book  I.,  and  Book  IV. 
unconcluded,  19 
conditional,  20 

formal,  to  be  drawn  up,  effect  of  on  commencement,  413 
consideration  of,  63 
disabilities  created  by,  116,  624 
proof  of,  80  et  seq. 
duration  of,  121  et  seq.,  413 
rescission  of,  479,  482 
specific  performance  of,  475 
dissolution  of,  570  et  seq.    See  Dissolution 
part  performance  of,  83 
construction  of.     See  Articles  of  Partnership 


844  INDEX. 

[The  paging  refers  to  the  [*]  pages.] 

CONTRACTS— continued. 

by  and  with  partners 
liability  on,  176 

when  under  seal,  177,  273 

when  not  under  seal,  177.     See,  too,  Bills  of  Exchange  and 

Promissory  Notes 
when  firm  is  not  named,  178 
not  joint  and  several,  192  et  seq. 

remedy  on  against  assets  of  deceased  partner,  192,  193 
when  confined  to  the  funds  of  the  firm,  201 
conduct  of  one  partner  a  defence,  116,  267,  268 
effect  of  change  of  firm  on,  284 
form  of,  176,  179 
who  to  sue  on,  274,  275 
when  firm  cannot  sue  on,  282 
effect  of  having  had  benefit  of,  180  et  seq. 

through  an  agent,  who  to  sue  on,  where  there  has  been  a  change 
amongst  the  partners,  286 
power  of  partner  to  enter  into,  134 
power  of  partner  to  vary,  134 
actions  by  or  against  partners  on.     See  Actions 
action  for  breach  of  express,  between  partners,  563 
when  required  to  be  signed,  only  binds  partners  who  sign,  179 
and  torts,  distinction  between,  198,  199 
pending  by  partnership,  how  dealt  with  on  dissolution,  558 
distinct,  double  proof  in  bankruptcy  in  respect  of,  748 
ratification  of,  371,  388 

CONTRIBUTION, 

foundation  of  right  to,  367  el  seq. 
right  to,  excluded  by 
agreement,  369 
fraud,  369 
disobeying  instructions,  370 

application  of  this  doctrine  to  directors,  368,  note  (/ 
gross  negligence,  378,  387 
illegality  of  transaction,  104,  372,  377 
agent's  right  to  from  his  principal,  369 
self-constituted  agent's  right  to,  372,  373 
trustees'  right  to,  373,  374 
co-owners,  no  right  to,  60 
partners'  right  to 
generally,  369 
in  respect  of 

services  performed  for  firm,  380 

after  dissolution,  381 
in  India,  381 
outlays  and  advances,  381.     See  Allowances 
debts,  liabilities,  and  losses,  385 

when  attributable  to  one  partner  rather  than  to  another, 

386 
when   attributable  to  one  partner's  misconduct  or  negli- 
gence, 387 
when  attributable  to  acts  done  bond  fide,  but  without  au- 
thority, 386 
when  firm  has  adopted  them,  388 
illegal  transactions,  377,  388,  note  (g) 
actions  at  law  between  partners  for,  564,  566 
difference  formerly  between  law  and  equity,  as  to,  374  et  seq. 


INDEX.  845 

("The  paging  refers  to  the  [*]  pages.] 
CONTRIBUTION— contin  tied. 

as  to  indemnity  before  loss  has  been  sustained,  375.     And  Add. 
amount  payable  by  each  contributory,  376 

as  to  contribution,  when  some  of  the  contributories  are  insolvent, 
376,  741 
liability  of  estate  of  deceased  partner  to,  211,  262 
between  wrongdoers,  377 
See  Indemnity 

CONVERSION 

of  bhare  of  deceased  partner,  when  it  is  bequeathed  for  life,  615,  620 
of  joint  estate  into  separate,  by  partnerships,  and  vice  versa,  334  et  seq., 
697 
agreements  for,  when  not  binding,  698  et  seq. 
if  fraud,  698 
if  executory,  698 

if  lien  of  parties  is  to  continue.  699 
evidence  of,  700 

effect  of  reputed  ownership  on,  700 
holding  out  on,  700 
of  joint  debts  into  separate  and  vice  versa,  703 

of  partnership  property,  effect  of  fraudulent,  on  right  of  proof  in  bank- 
ruptcy, 724 
of  realty  into  personalty,  343  et  seq. 

in  cases  of  partnership  for  fiscal  purposes,  347,  and  note  (a) 
doctrine  as  to,  does  not  apply  to  co-owners,  347 
may  be  prevented  by  agreement,  346 

CONVEYANCE 

when  act  of  bankruptcy,  631 
See  Deed;  Fraudulent  Conveyance 

CONVICTS 

cannot  be  members  of  a  partnership,  71 
administrator  of  property  of,  74 
to  what  extent  disabled,  74 

CO-OWNERS 

not  co-partners.  51 
joint  purchasers  of  goods,  53 

part  owners  sharing  the  produce  of  their  property,  17,  18,  53,  347 
profits,  18,  331 
gross  returns,  18 
when  common  property  to  be  considered  partnership  property,  18,  331 

et  seq. 
co-ownership  and  co-partnership  compared,  52 
doctrine  of  conversion  does  not  apply  to,  347 
of  land,  58,  331-333 
of  mines,  54 
of  patents,  62 
of  copyrights,  62 
of  race-horses,  18,  51 
of  ships,  60.     See  Ships 
of  newspaper,  364,  note  (w) 
admissions  of,  128,  note  (I) 
lien  of,  57,  60,  355 
remedies  of,  inter  se,  57-62 
receivers  appointed  for,  when,  548 

CO-OWNERSHIP 

and  co-partnership  compared,  52 


846  INDEX. 

[The  paging  refers  to  the  [*]  pages.] 
CO-PARTNERS  AND  CO-PARTNERSHIP, 
See  Partners:  Partnership 

COPYRIGIHT, 

registering  in  name  of  partners,  112,  115 
rights  of  co-owners  of,  62 
indivisibility  of,  62,  note  (k) 

CORPORATIONS, 

distinguished  from  partnerships  and  companies,  4 

persons  when,  6,  note  (d) 
may  be  in  partnership  with  individuals,  78 
may  petition  under  Bankruptcy  act,  633 
presuming  to  act  as,  93 
name  of,  may  be  a  trade  mark,  114,  115 

COST  BOOK  MINING  COMPANY, 

shares  in,  how  far  real  estate,  348 

liability  of  shareholders  in,  for  goods  supplied  to  the  mine,  133 
for  money  borrowed,  133 
See,  also,  Mines 

COSTS, 

costs  of  trustees  in  bankruptcy,  how  paid  as  between  joint  estate,  694 

separate  estates,  694 
of  action  for  dissolution,  517;  on  ground  of  lunacy,  579 

account,  517 
of  administration  action  by  separate  creditor  paid  in  priority  to  joint 

creditors,  612,  613 
one  partner  bound  to  idemnify  firm  against,  if  he  sues  in  its  name,  271 
indemnifying  trustee  against,  when  solvent  partners  sue,  289 
firm  liable  for,  in  cases  of  breach  of  trust,  161 

CO-SURETIES.     See  Sureties 

COUNTER-CLAIM, 

what  may  be  set  off  in,  290 

COURT, 

administration  of  deceased  partner's  estate  by,  protects  executors,  594 

COURT  IN  BANKRUPTCY, 

jurisdiction  of,  to  ascertain  share  of  deceased  partner,  649 

COVENANTS, 

liability  of  partners  on,  177 

in  the  case  of  retired  partners,  243 
what  are  joint,  and  what  are  several,  280 
with  one  partner  on  behalf  of  firm,  277 

liability  several  as  well  as  joint,  when,  193,  437,  note  (o),  and  Addenda 
actions  by  partners  on.  273 

one  partner  against  another  on,  563 
when  firm  cannot  sue  on,  277 
set-off  in  actions  on,  290  et  seq. 
not  to  carry  on  business,  436,  437,  note  (o) 
not  to  sue, 

partner  may  join  in  suing  notwithstanding,  270 

when  not  equivalent  to  a  release,  237 
to  pay  out  of  funds  of  partnership  only,  effect  of,  201 

CREDIT, 

of  firm,  destruction  of,  not  per  se  a  ground  for  dissolution,  581 
See  Borrowing  Money. 


INDEX.  847 

[The  paging  refers  to  the  [*]  pages.  ] 
CREDITOR, 

meaning  of  the  phrase  a  partner  is  a  creditor  of,  or  a  debtor  to,  his  own 

firm,  110 
of  firm  not  a  separate  creditor  of  members,  198,  &c.     See  Debts 
joint  and  separate,  who  is,  701  et  seq. 

secured,  position  of,  in  the  case  of  the  bankruptcy  of  the  debtor,  714,  749 
of  firm  has  no  lien  on  its  property,  334 

petition  by,  for  adjudication  of  bankruptcy  against  partners,  633  et  seq. 
rights  of 

against  partners, 

dormant  partners,   125,    192,   note   (d),    212.     See  Dormant 

Partners 
the  estate  of  a  deceased  partner,  594  et  seq. 

See,    also,     Deceased    Partner;    Executors; 
Liability 
of  a  bankrupt  partner,  729.     See  Bankruptcy 
of  bankrupt  firm,  720,  743 
incoming  partners,  205  et  seq. 

quasi  partners.     See  Quasi  Partnership;  Holding  Out 
retired  partners,  223  et  seq. 

See  Retired  Partner;  Liability 
surviving  partners,  602.     See  Surviving  Partners 
effect  of  dissolution  of  partnership  on,  134.  586 
not  affected  by  agreements  between  partners,  239.     See  Notice 
of  deceased  partner,  to  an  account,  494 
conflict  of  different  classes  of  creditors,  598 
loss  of  rights  of, 

by  payment,  225  et  seq.     See  Appropriation  of  Payments 

by  dealings  with  the  continuing  partners,  242,  253 

by  dealings  with  the  surviving  partners,  229 

by  merger  of  debt,  254  et  seq.,  703 

by  lapse  of  time,    257  et  seq.,   597.     See  Limitations, 

Statute  of 
by  release,  237 

by  substitution  of  debtors  and  securities,  239  et  seq 
CREDITORS'   DEED,  756 

trustees  of,  not  partners,  30 
assent  of  one  partner  to,  135 
by  partners,  631 

by  one  partner  for  creditors  of  firm,  631 
CRIME, 

partnership  for  sharing  profits  of,  93,  and  note  (n) 
CRIMINAL  LAW, 

remedy  of  one  partner  against  another,  456,  457 

CRIMINAL  PROSECUTION 

of  partner,  ground  for  dissolution,  582 

CROWN, 

prerogative  of,  as  regards  shares,  in  partnership,  340,  583,  note  (t) 
CUSTODY 

of  books  of  firm,  agreements  as  to,  420.     See  Books 
CUSTODY  OF  FIRM, 

misapplication  of  money  in,  consequence  of,  150 — 162 
CUSTOMERS, 

allowance  for  treating,  383 

right  to  solicit  old,  440,  and  note  (g) 
See  Dissolution  and  Notice 


848  INDEX. 

[The  paging  refers  to  the  [*]  pages.] 
CUSTOMS 

of  merchants  as  to  payment  of  interest,  389 

of  trade,  effect  of  on  reputed  ownership,  677,  note  (y) 

rendering  agent  personally  liable,  177,  note  (?/t) 

illegal,  unknown  to  principal,  effect  of,  370,  note  (I),  372,  note  (t) 

DAMAGE, 

to  firm,  when  necessary  to  support  action  by  it,  278 

DAMAGES, 

as  to  actions  between  partners  for,  561 

may  be  set  off  against  debts,  658 

what  fraud  sufficient  to  support  an  action  for,  479,  481 

unliquidated  when  not  provable  in  bankruptcy,  707 

action  for  account  not  dismissed  because  plaintiff  entitled  to,  458 

co-owners  no  right  of  action  for  by  way  of  contribution,  60 

DATE, 

of  dissolution  in  cases  of  lunacy,  579 

misconduct,  579 
other  cases,  572 
See  Commencement 

DEALINGS, 

with  one  partner  only,  179 

bona  fide  with  bankrupt  partner,  681 

with  solvent  partners,  671 

by  creditors  with  continuing  partners,  effect  of,  on  rights  against  retired 

partners,  242  et  seq. 
by  one  partner  with  his  co-partners,  305 

DEATH  OF  PARTNER, 

dissolution  of  partnership  by,   590  ex  seq.     See  the  Analysis  of  Con- 
tents, Bk.  IV.  c.  3,  and  infra,   Deceased  Paetnee,   Executors, 
Surviving  Partners,  Dissolution 
effect  of,  on  ad  j  udication  of  bankruptcy,  637,  638 
on  right  to  sue,  288 

1.  As  between  partners,  590 

works  dissolution,  590 

return  of  premium  in  case  of,  67 

accounts  on,  514 

position  of  executors  of  deceased  partner,  590,  593 

surviving  partners,  591 
account  of  subsequent  profits,  521  et  seq.,  592 
making  co-partner  executor,  593 
succession  duty  on,  594 
effect  of  as  regards  goodwill,  443 

2.  As  regards  joint  creditors,  211 

position  of  executors  of  deceased  as  regards  creditors  of  firm,  211,  594 
tabular  view  of  cases  showing  where  estate  of  deceased  partner  discharge 

ed,  and  where  not,  595 — 597 
administration  of  deceased  partner's  estate  by  creditor,  598 
rights  of  joint  and  separate  creditors  contrasted,  598 
form  of  order  for  administration  by  creditor,  600 
personal  liability  of  executors,  593,  604 
liability  of  assets  by  acts  of  testator,  605 
direction  by  will  to  carry  on  trade,  606 
trust  to  carry  on  business,  607 
amount  of  assets  liable,  609 
right  of  creditors  to  stand  in  place  of  executors,  606,  607 


INDEX.  849 

[The  paging  refers  to  the  [*]  pages.] 
DEATH  OF  PARTNER— continued. 

3.  As  regards  separate  creditors,  legatees,  &c. 

separate  creditors,  legatees,  &c,  must  look  to  executors,  610 

surviving  partners  not  proper  parties,  611,  612 

account  between  executor  and  surviving  partner,  613,  614 

arrangements  between  executor  and  surviving  partner,  614 

rigbts  when  share  of  deceased  not  got  in,  614 

interest  and  profits,  615 

profits  made  since  death,  527,  616 

accounts  of  when  ordered,  616,  617 
when  refused,  617 
executors  continuing  business,  614 
specific  bequests  of  shares,  619 

tenant  for  life  under,  620,  621 
duty  of  executors  to  sell  shares,  620 
loans  by  executors,  618 
executors  becoming  partners,  618 

DEBENTURES, 

not  within  doctrine  of  reputed  ownership,  678 
DEBTOR, 

partner  in  what  sense  debtor  to  firm,  110,  401 
substitution  of,  effect  of  on  liability  of  firm,  239  et  seq. 
DEBTS, 

of  partnership,  effect  of,  on  its  duration,  121 
payment  of,  out  of  assets  of  deceased  partner,  194,  195,  196 
to  one  partner,  134 
after  dissolution,  134 
to  bankrupt  partner,  668 
ot  debt  not  due  to  firm,  134 
by  taking  bill  in  payment,  136 
release  of,  by  one  partner,  135,  137 
receipt  for,  by  one  partner,  135 

by  surviving  partner,  284 
transfer  of,  assent  of  one  partner  to,  135 
one  partner  taking  shares  as  security  for,  141 
one  partner  settling,  136 
promise  by  one  partner  to  pay,  136 
tender  of,  to  one  partner,  136 

liability  of  partners  for.     See  Creditor  ;  Liability 
extinction  of  by  doctrine  of  merger,  254  el  seq. ,  703 

by  payment,  225  et  seq.     See  Appropriation  of  Pay- 
ments 
by  release,  237  et  seq.     See  Release 
by  substitution  of  debtors,  239  et  seq. 
by  lapse  of  time,  257  etseq.,  508,  597.     See  Limitation, 

Statutes  of 
by  discharge  of  bankrupt,  752 
by  arrest,  238 
of  partnership  when  joint  and  several,  193,  199 
claim  for  against  assets  of  deceased  partner,  192,  193 
set-off  of,  290.     See  Set-off 
buying  up,  at  less  than  their  nominal  value,  effect  of 

in  bankruptcy,  663 
assignment  of,  effect  of,  as  regards  set-off,  291 
to  continuing  partners,  450 
may  now  be  made,  285 
assignee  of,  may  sue,  when,  285,  652 

right  of  partner  to  insist  on  payment  of,  351,  352,  and  note  (q) 
*  31   LAW   OF   PARTNERSHIP. 


850  INDEX. 

[The  paging  refers  to  the  [*]  pages.] 

DEBTS— continued. 

agreement  by  partner  to  bring  in  good,  417 

guarantee  against,  giving  to  incoming  partner,  418 

agreements  as  to  getting  in,  448 

right  of  solvent  partners  to  get  in,  670,  671 

in  what  cases  new  partner  may  join  in  action  for,  285 

application  of  doctrines  of  reputed  ownership  to,  678,  679 

order  in  which  joint  and  separate  are  paid,  598,  709,  and  note  (z) 

what  are  joint  and  what  are  separate,  701.     See  Joint  Debts 

separate.     See  Separate  Debts 

proofs  ot  bankruptcy,  707.     See  Bankruptcy 

when  sufficient  to  support  bankruptcy  petition,  634 

vest  in  trustee  in  bankruptcy,  652 

DECEASED  PARTNER, 

actions  against  estate  of,  parties  to,  460 
assignment  of  share  of  by  executors,  450 
administration  of  estate  of 

by  the  surviving  partners,  591 
by  creditors  of  the  firm,  598 

by  the  separate  creditors,  legatees,  or  next-of-kin,  610 
adjustment  of  the  conflicting  rights  of  creditors  in  action  for,  598 

joint  and  separate  creditors,  598 
secured  creditors,  602 
form  of  order  for,  600 
effect  of  judgment  for,  on  right  to  sue  surviving  partner,  195,  603, 

612 
set-off  in,  291  et  seq. 
account  ot  assets  of 

where  they  have  been  improperly  employed  in  trade,  606,  724 
right  to,  by  separate  creditors  and  legatees,  494 
where  share  of  deceased  not  got  in,  614 
appointment  of  a  representative  of.  591 
liability  of  survivors  for  assets  of.  614 
liability  of  estate  of 

to  creditors  of  the  firm,  194,  594 
in  respect  of  what  occurred  before  death,  594 
in  respect  of  what  occurred  after  death,  604 
table  of  cases,  595—597 
where  assets  have  been  continued  in  the  partnership  business, 
by  direction  of  deceased,  606  et  seq.,  722 
where  no  direction,  617,  724 
in  case  of  bankruptcy,  722,  note  (g) 
after  judgment  against  the  surviving  partners,  194,  257 
notwithstanding  the  Statute  of  Limitations,  262 
for  torts,  595 
discharge  of  estate  of,  from  debts  of  firm 

by  appropriation  of  payments,  229,     See  Appropriation  of  Pay- 
ments 
by  Statute  of  Limitations,  597 
by  dealings  with  the  surviving  partners,  249,  596 
none  where  dealings  induced  by  fraud,  252 
specific  performance  of  agreements  relative  to  share  of,  432 
executors  of,  may  be  joined  as  defendants  with  survivors,  when,  288,  460, 

598,  603 
rescission  of  contracts  relating  to  his  share,  487,  488,  and  note  (n) 
where  executors  partners,  488 
where  they  are  not,  487 

See  Death  ;  Executors  ;  Surviving  Partners 


INDEX.  851 

[The  paging  refers  to  the  [»]  pages.] 
DECEIT, 

action  for  damages  for,  162 

distinguished  from  other  actions  based  on  fraud,  163 
See  Fraud 

DECREE, 

for  dissolution  of  partnership,  516 

in  case  of  lunacy,  577 
for  the  administration  of  the  estate  of  a  deceased  partner,  600 
for  partnership  account,  516 

'See  Account  ;  Dissolution  ;  Judgment  ;  Order 

DEED, 

one  partner  has  no  authority  to  bind  firm  by,  136,  137 
necessity  of,  to  dissolve  a  partnership  created  by  deed,  572 
not  necessary  to  prove  partnership,  87 
who  can  sue  on,  177 
effect  of  removing  seal  from,  238 

of  partnership,  general  rules  for  construction  of,  406,  et  seq. 
power  to  vary,  409 

DEFENCE, 

to  actions  by  partners,  founded  on  conduct  of  one  partner,  116,  117 

alteration  in  the  law  as  to,  by  the  Judicature  acts,  267  et  seq. 
to  actions  for  an  account  and  discovery,  506 

accord  and  satisfaction,  515 

account  stated,  512 

award,  514 

denial  of  partnership,  507 

payment,  515 

release,  516 

Statute  of  Limitations,  508 

laches,  466  et  seq. 

illegality,  105 

waiver,  516 

DEFINITIONS 

of  partnership,  2  et  seq. 

DELAY 

of  plaintiff,  when  a  bar  to  relief,  467.     See  Laches;   Limitation, 
Statute  of 

DEMURRER, 

laches  could  not  be  taken  advantage  of  by,  475 

DENIAL  OF  PARTNERSHIP, 

effect  of,  in  action  for  account  and  discovery,  506 

as  regards  the  appointment  of  receiver,  552 

DEPOSIT  OF  DOCUMENTS, 

effect  of  as  regards  the  doctrines  of  reputed  ownership,  678.     See  Equit- 
able Mortgages 

DESTRUCTION  OF  ACCOUNTS, 

consequence  of,  in  taking  accounts,  405 

DEVASTAVIT, 

by  executor,  proof  for,  738,  note  (j) 

DEVISEES, 

of  land  and  trade  carried  on  on  it,  how  far  partners,  332,  333 


852  INDEX. 

[The  paging  refers  to  the  [*]  pages.  ] 
DEVOLUTION, 

of  partnership  property,  341 
legal  estate  in  land,  341 
choses  in  action,  341 
chattels,  342 
goodwill,  342 

DIRECTION, 

by  deceased  partner  to  carry  on  trade,  effect  of,  610 

DIRECTORS, 

liability  of,  for  work,  &c,  done  by  their  authority,  45 
cheques  drawn  by,  133,  note  (d) 
right  of,  to  contribution,  375 

DISABILITIES, 

of  partners,  116.  117,  268 
under  Bankruptcy  law,  624 

DISCHARGE. 

by  one  partner,  effect  of,  135 

from  liability.     See  Liability. 

of  bankrupt.     See  Certificate  and  Order  of  Discharge 

DISCLAIMER, 

by  trustee  of  bankrupt's  onerous  property,  651 

DISCLOSURE, 

duty  of  partner  to  make,  to  co-partners,  305  et  seq.,  306 

DISCOVERY.     See  Inspection 

of  partners  where  name  of  firm  is  used,  265 

right  of  partner  to,  501 

in  actions  for  account,  404,  501 

defences  to  actions  for,  506 

accord  and  satisfaction,  515 

account  stated,  512 

award,  514 

waiver,  516 

denial  of  partnership,  507 

release,  516 

Statute  of  Limitations,  508 

laches,  466 

illegality,  102 
where  right  to  depends  upon  a  preliminary  question,  507,  508 
by  unlicensed  brokers,  97 
DISCRETION, 

power  of  partner  to  act  on  his  own,  127 
as  to  joining  firm,  20,  433,  555.  See  Option 
of  court 

as  to  interfering  between  partners,  464  el  seq. 
See,  also,  Injunction  ;  Specific  Performance 

DISPUTES 

between  partners,  &c,  mode  of  settling,  313.     See  MAJORITY 
where  they  relate  to  ordinary  business,  314 
where  they  relate  to  a  change  in  the  nature  of  the  business,  315 
all  partners  entitled  to  be  heard,  315 
as  to  internal  matters,  courts  do  not  interfere,  466 

DISSENTIENTS, 

powers  of,  315.     See  MAJORITY 

retirement  of,  317 

offer  of  indemnity  to,  318 


INDEX.  S53 

[The  paging  refers  to  the  [*]  pages.] 
DISSOLUTION, 

actions  for,  461,  491  etseq. 
parties  to,  459  et  seq. 
next  friend  of  lunatic  may  bring,  579 
should  be  brought  in  Chancery  Divison,  491 
how  statement  of  claims  should  be  framed,  491 
where  partnership  is  at  will,  491 

where  partnership  may  be  wound  up  under  the  Companies  act 
491 
not  seeking,  rule  as  to  granting  relief  in,  464  et  seq. 

parties  to,  462,  463 
for  share  of  assets  after  a,  569 
causes  of  570  et  seq. 

will  of  any  partner,  571 

unless  no  right  of,  under  agreement,  10,  note  (e) 
impossibility  of  going  on,  owing  to 

the  hopeless  state  of  the  partnership  business,  576 
the  lunacy  of  one  of  the  partners,  577 
misconduct,  &c,  580 
death,  586  et  seq.    See  Deceased  Partner 
retirement,  573 
expulsion,  574 
transfer  of  interest,  583,  viz. 

by  the  assignment  by  one  partner  of  his  share  in  the  partner- 
ship, 363,  583 
by  the  taking  of  a  share  in  execution  under  a  fi.  fa.,  359.  and 

note  (rf),  583 
by  bankruptcy,  577,  583.    See  Bankruptcy 

of  one  partner,  649,  666 
formerly  by  marriage  of  female  partner,  583 
the  occurrence  of  some  event  which  renders  the  continuance  of  the 
partnership  illegal,  585 
war,  585 
notice  of 

importance  of  giving,  213,  214 
each  partner  has  a  right  to  give,  214 
how  to  be  given,  222 
what  amounts  to,  221  et  seq.,  571 

insufficient  notice  of,  426 
effect  of,  215 

as  regards  the  doctrines  of  reputed  ownership,  680 
as  regards  future  acts,  210  et  seq. 
injunction  against  circulating,  539 
time  from  which  dates,  572 
in  case  of  lunacy,  579 
in  case  of  misconduct,  582,  583 
consequence  of,  586 

as  regards  past  acts,  240 

future  acts,  210 
return  of  premium,  65.     See  Premium 
apportionment  of  premium,  64  et  seq. 
lien  of  solicitors,  120 
actions  by  and  against  the  firm,  284 
getting  in  debts,  448,  669 

conversion  of  joint  into  separate  property,  336 
creditors,  586 

when  they  agree  to  look  for  payment  to  continuing 
partners  only,  241 . 
partners,  587 


S5-A  INDEX. 

[The  paging  refers  to  the  [*]  pages.  ] 
DISSOLUTION— continued. 

right  to  carry  on  business,  437  • 

bills  endorsed  after,  213,  214,  673 

torts,  214 

property  acquired  after,  326 

articles,  410 

pending  contracts,  558 

payment  for  services  rendered  after,  381 
how  far  a  partnership  continues  after,  217 
deed  not  necessary  on,  572 

award  on  submission  of  all  matters  in  difference,  426 
agreements  as  to,  425,     See  Articles  of  Partnership 
driving  a  partner  to,  497,  575 
provision  for,  in  case  of  insolvency,  425 
injunctions  in  actions  for,  491,  541.     See  Injunctions 
rescission  of  agreements  made  on,  448 

receivers,  appointment  of  in  actions  for,  547  et  seq.     See  Receiver 
accounts  on,  421,  518  et  seq. 
account  without,  494  et  seq.     See  ACCOUNT 

of  profits  since,  326,  521 
sale  of  partnership  property  on,  555 
valuation  of  share  on,  429 

stamp  on  assignment  by  outgoing  partner,  450 
clauses  in  deeds  as  to,  425 

part  payment  by  continuing  partner  after,  effect  of,  263 
of  company  by  bankruptcy  of  shareholder,  649 

DISTANCES, 

measurement  of  437,  note  (o) 

DISTINCT  CONTRACTS, 

double  proof  in  respect  of,  748 

DISTINCT  TRADES, 

effect  of  carrying  on  as  regards  proof  in  bankruptcy 
by  a  separate  estate  against  a  joint  estate,  725 
by  a  joint  estate  against  a  separate  estate,  736 
by  a  creditor  in  both  trades,  747,  748 

DISTRESS 

in  name  ol  firm,  137 

on  partnership  goods  for  rent  due  from  partners  separately  ;  see  ex  parte 
Parke,  18  Eq.  381 

DIVIDENDS, 

payment  of,  out  of  capital,  394,  note  (e) 
lipportionment  of,  621 
declaration  of,  in  bankruptcy,  693 
See  Profts 

DIXON, 

his  definition  of  partnership,  2 

DOCUMENTS, 

proof  of  partnership  by  informal,  85 

production  and  inspection  of,  in  actions,  501.      See  Production  of 
Documents 
DOMAT, 

his  definition  of  partnership,  2 

DOMICIL, 

of  partners,  72 

effect  of,  on  partnership  in  case  of  war,  72,  73 


INDEX.  855 

[The  paging  refers  to  the  [*]  pages.  ] 

DOORS, 

names  on,  evidence  of  partnership,  89 

DORMANT  PARTNER, 

liabilities  of,  10,  125,  192,  note  (d) 
on  written  contract,  178 

on  contracts  in  which  he  is  not  named,  45,  212,  275,  note  (s) 
authority  of,  125 

position  of,  and  that  of  mere  lender  compared,  16 
who  is  not,  212,  note  (h) 
effect  of  retirement  of,  212 

where  continues  to  hold  himself  out,  216 
notice  of  retirement  of,  when  necessary,  213 

discharge  of,  by  doctrine  of  appropriation  of  payments,  229.     See  Lia- 
bility 
by  substitution  of  debtors,  difficulties  of,  245 
when  to  sue  with  others,  276 
actions  against,  281 
set-ott'  in  actions  by  and  against,  294 
may  be  made  bankrupt,  633 
■  may  be  included  in  joint  adjudication,  631 
how  affected  by  doctrines  of  reputed  ownership,  689 

when  dead,  691 
how  affected  by  judgment  against  co-partners,  255,  note  (s).     And  Ad- 
denda 

DOUBLE  PROOF, 

by  principal  and  surety,  effect  of,  719 

rule  against,  719,  743 

when  allowed,  747 

election  in  case  of,  743 

when  creditor  holds  security,  749 

DRAFT 

of  agreement  evidence  of  partnership,  89 

DRAWINGS, 

monthly,  agreements  as  to,  418 

DURATION 

of  partnership,  121  et  seq.    See  Dissolution 
agreements  as  to,  413 
after  dissolution,  217 

effect  of,  on  partnership  articles,  410 
effect  of  taking  lease,  121 

outstanding  debts,  121 
after  term  has  expired,  122 
implied  terms  of,  122 
of  liability,  201  et  seq.     See  Liability 
commencemeat  of  liability,  201 

of  firm  for  acts  of  incoming  partner,  202,  203 
of  incoming  partner  for  acts  of  firm,  205 — 207 
of  promoters  of  companies,  45,  206 
termination  of  liability,  210 
as  to  future  acts,  210 
by  death,  211 

by  bankruptcy,  212.     See  BANKRUPTCY 
by  retirement  of  dormant  partner,  212 
by  dissolution  of  partnership,  213 
as  to  pa.»t  acts,  223 
by  payment,  225 


856  INDEX. 

[The  paging  refers  to  the  [*]  pages,] 
DURATION— continued. 

release,  237 

substitution  of  debtors  and  securities,  239 
merger,  254 
lapse  of  time,  257 
DUTIES 

of  partners  generally.     See  Analysis  of  Contents,  Bk.  Ill, 
inter  «>,  303,  304 

not  all  to  be  found  in  partnership  articles,  406 
See  also  Partners 

EJECTMENT, 

by  partners,  279 

by  one  partner  against  another,  328,  note  (t),  562 

by  one  co-owner  against  another,  58 

ELECTION, 

formerly  between  action  and  proof  in  bankruptcy,  718 

between  proof  against  joint  or  separate  estates,  743 

when  made  conclusive,  745 

when  not  deemed  to  have  been  made,  746 

by  petitioning  creditor,  747 

ELECTION,  PARLIAMENTARY, 

right  of  partner  to  vote  at,  in  respect  of  partnership  property,  348 

EMBEZZLEMENT 

by  servants  sharing  profits,  13,  note  (r),  457,  note  (a) 
by  partner,  457 

ENEMY, 

partpership  for  trading  with,  illegal,  73,  92 

ENGRAVINGS, 

registration  of,  under  name  of  firm,  113 

EQUALITY 

of  shares  in  partnership,  348,  349 

of  profit  and  loss  but  not  of  capital,  403 

EQUITABLE  MORTGAGES 

for  advances,  effect  of  change  of  firm  on,  119,  120 
given  by  one  partner  on  behalf  of  firm,  140 
may  be  created  or  extended  by  parol,  119,  120,  715 
how  they  affect  right  to  prove  in  bankruptcy,  714 

observations  on,  715 
how  affected  by  doctrine  of  reputed  ownership,  678 

EQUITY, 

differences  between  rules  of  law  and,  as  regards  contribution  and  indem- 
nity, 374 

difference  between  rules  of,  and  bankruptcy  as  regards  secured  creditors, 
602 

remedy  in,  in  respect  of  money  of  which  the  benefit  has  been  had,  191 

EQUITIES  OF  REDEMPTION 

not  within  doctrine  of  reputed  ownership,  678 

•  ESTATE 

of  deceased  partner.     See  Death  ;  Deceased  Partner  ;  EXECUTORS 
of  bankrupts.     See  Bankruptcy. 

ESTOPPEL 

by  holding  oneself  out  as  partner,  40 
discharge  of  retired  partner  by,  249 


INDEX.  857 

[The  paging  refers  to  the  [*]  pages.  ] 
EVICTION, 

annuity  payable  until,  436 
See  Ejectment 

EVIDENCE 

that  a  person  is  a  partner  or  quasi  partner,  80  et  seq.     Bk.  I.,  cap.  4. 
what  has  to  be   proved,  83 
usual  means  of  proof,  84.  89,  90 
effect  of  the  Statute  of  frauds,  80 
where  there  is  no  writing,  80,  84 
acts  of  alleged  co-partner,  85 
admissions,  87 

articles  of  partnership  need  not  be  proved,  87 
of  future  partnership,  80 
retrospective  articles,  88 
of lunaay,  578 

upon  which  partnership  accounts  are  taken,  536 
partnership  books,  536 
banker's  books,  537,  note  {i) 

See,  also,  Liability  ;  Proof  of  Debts  ;  Notice 

EXCISE  LAWS, 

illegality  of  partnerships  infringing,  95,  99,  note  (s) 
effect  of  breach  of,  by  one  partner,  149 
contribution  in  case  of  breach  of,  378 

EXCLUSION 

from  management  of  partnership  business,  301 

agreements  as  to,  10,  302 

injunction  in  case  of,  543 

receiver  in  case  of,  551 

account  in  case  of,  496 
from  share  of  profits,  395 

EXECUTION 

against  a  partner  for  a  separate  debt,  356 

duty  of  the  sheriff,  356 

sheriff  seizes  the  partnership  property,  356.  357 

sale  of  execution  debtor's  share,  358 
may  be  by  private  contract,  358 

rights  of  the  other  partners,  358 

interpleader  by  sheriff,  358,  note  (q),  362 

since  the  Judicature  acts,  361  ;  form  of  order,  see  Seton  on  Decrees, 
1214,  edition  4 

action  against  sheriff  by  solvent  partner,  568 

position  of  the  purchaser  from  the  sheriff,  358 

position  of  the  execution  debtor,  359 
creditor,  361 

purchase  of  interest  by  his  co-partners,  360 

dissolution  of  partnership  by,  359,  note  (d),  583 

injunction  in  cases  of,  359 

receiver  in  cases  of,  359 
against  partners  for  their  joint  debts,  298  et  seq. 

against  whom  it  may  issue  when  judgment  against  firm,  299,  300 

against  what  property.  300 

where  there  is  a  receiver,  300,  554 

where  alleged  debtor  abroad,  300,  note  (/) 
benefit  of  belonging  to  trustee  in  bankruptcy,  654.  675 
when  levied  by  seizure  and  sale  not  invalid  as  act  of  bankruptcy,  665,  675 
seizure  by  sheri ft'  protects  creditor,  709,  note  (b) 


858  INDEX. 

[The  paging  refers  to  the  [*]  pages.] 
EXECUTION  CREDITOR, 

conflicting  rights  of,  and  trustee  in  bankruptcy,  674 
See  Execution 

EXECUTORS, 

of  a  deceased  partner 

do  not  become  partners,  590 

unless  express  agreement  to  that  effect,  590 
liabilities  of,  591 

to  surviving  partners,  591 

to  creditors  of  the  firm,  594  et  seq.,  604 

as  regards  what  occurred  in  the  lifetime  of  the  testator,  594, 

595,  603 
as  regards  what  has  occurred  since  the  testator's  death,  604 
by  sharing  profits  with  surviving  partners,  604,  note  (I) 
by  carrying  on  business  with  the  assets  of  their  testator,  604 
et  seq. 
where  direction  to  carry  on  trade,  606 
trust  to  carry  on  business,  607 
liability  to  be  made  bankrupt,  593 
to  the  separate  creditors,  legatees,  and  next  of  kin  of  the  deceased,  610 
where  partnership  was  illegal,  108 

the  assets  of  the  deceased  are  not  got  in,  614 
they  are  the  surviving  partners,  528  et  seq.,  614 
they  enter  the  firm,  618 
wilful  default,  612 
duty  of,  to  convert  share  into  money,  593,  620 

rescission  of  contracts  between  executors  and  surviving  partners.  487  et  seq. 
effect  of  part-payment  by,  as  regards  the  Statute  of  Limitations,  262 
injunction  against,  542 
account,  stated  with.  613 
actions  by  and  against,  288,  461,  612 

parties  to,  288,  461,  612 
allowances  to,  in  India,  381 
illegality  set  up  by,  108 
loans  by,  to  surviving  partners,  615,  618 
receiver  appointed  against,  548 

cannot  prove  in  bankruptcy  against  surviving  partners,  when,  722 
rights  of 

as  regards  surviving  partners,  591 

where  they  are  surviving  partners.  593,  614 

to  interfere  with  surviving  partners,  594 

to  account,  493,  591 

to  compel  proper  appropriation  of  payments,  591 

to  have  the  assets  sold,  592,  593,  620* 

as  regards  good-will,  443,  592 

to  account  of  profits  made  since  their  testator's  death,  521  et  seq., 

592,  616  et  seq. 
to  compensation  for  trouble,  592 
to  indemnity,  594,  607 
extent  of  indemnity,  609 

to  retain  balance  due  on  the  partnership  account,  490 
agreement  with,  is  with  those  who  prove,  19,  note  (z) 
See  Death;  Deceased  Partner 

EXECUTORY  AGREEMENT 

not  sufficient  to  convert  joint  into  separate  estate,  337,  698 

EXPELLED  PARTNER.     See  Expulsion 


INDEX  859 

[The  paging  refers  to  the  [*]  pages.] 
EXPENSES 

of  forming  company,  liability  of  promoters  for,  385 

of  trustee  in  bankruptcy  when  paid  out  of  joint  estate,  694,  720,  note  (r) 

separate  estates,  694 
of  managing  partner,  380,  and  note  (n) 
right  of  partner  to  charge  for,  381,  382,  note  (ij) 
no  allowance  in  respect  of,  unless  actually  incurred,  384 
to  be  charged  to  the  firm,  agreements  as  to,  418 
action  between  partners  for  not  contributing  to,  564 
See,  also,  Contribution 

EXPULSION 

of  partner,  574 

exercise  of  powers  of,  411,  426,  427,  575 
provisions  in  articles  as  to,  426,  427 
agreements  made  on,  when  void,  486,  487 

EXTENSION  OF  BUSINESS, 

power  of  partners  as  to,  137,  315  et  seq. 

EXTENT, 

sale  of  share  under,  340 

EXTRAORDINARY  NECESSITY, 

power  of  one  partner  to  bind  firm  in  cases  of,  126 
See  Implied  Powees 

FACTORS'  ACTS.  140,  141 

FALSE  ACCOUNTS 

rendered  by  one  partner,  165.     See  Accounts 

FALSE  STATEMENTS, 

rescission  of  contract;  for,  &c,  479,  482.     See  Fraud 
by  one  partner,  liability  of  firm  for,  162  et  seq. 
actions  for,  481 

FARMERS, 

accounts  between,  59 

sharing  profits  when  partners,  332,  333 

one  of  a  firm  of,  has  no  power  to  bind  others  by  bills,  131 

FELONS, 

partners  who  are,  73,  74 
partnership  between,  93,  note  (n) 

FI.  FA. 

sale  of  partner's  share  under,  340,  356  et  seq. 
dissolves  the  partnership,  583 
See  Execution 

FIRM, 

mercantile  and  legal  view  of,  110  et  seq. 

consequence  of  difference,  112 
in  what  sense  a  debtor  to  or  creditor  of  its  own  members,  110,  401 
name  of,  112.     See  Name 

should  be  expressed  in  the  articles,  413 

partners  may  be  registered  as  shareholders  in,  112 

as  owners  of  copyright,  112,  113 
a  trade  mark,  114 
mistakes  in,  115 
how  described  in  legal  instruments,  112 
each  partner  the  agent  of,  124.     See  Implied  Powers 


860  INDEX. 

[The  paging  refers  to  the  [*]  pages.  ] 
FIRM — continued. 

actions  by  and  against 

general  remarks  on,  115,  273 

may  be  brought  in  name  of,  112,  265.     See  Action 

formerly  could  not  sue  or  be  sued  by  one  of  its  own  members,  115 

at  law,  by  another  firm,  if  one  partner  was 
common  to  both,  115,  116 
conduct  of  one  partner  when  a  defence  to  an  action  by  him  and  his 
co-partners,  116,  117 
legacy  to,  113 

advances  to,  by  trustees,  113 

may  act  in  bankruptcy  by  one  of  its  members,  624 
proof  of  debts  due  to,  707 
changes  in,  effect  of,  113,  117.     See  Changes 
as  regards  set-off,  297 

sureties  and  securities,  117,  118 
equitable  mortgages,  119 
solicitors'  lien,  120 
actions,  284 
two  firms 

with  common  partners.     See  Connected  Firm;  Common  Partner 
actions  between,  115,  116 

proof  in  bankruptcy  when  one  contains  another,  726 
with  same  name,  liabilities  of  on  each  other's  bills,  181 
See  Partnership;  Dissolution 

FIXTURES 

not  within  the  reputed  ownership  clause  in  the  Bankrupt  acts,  678 

FOLLOWING 

trust  money,  162,  521  et.  seq. 

FOREIGN  BANKRUPTCY 

effect  of,  on  proof  of  debts  in  England,  719 

FOREIGN  CONTRACTS 

remedy  on,  barred  by  the  Statute  of  Limitations,  259 

FOREIGN  DEBTOR. 

execution  on  judgment,  in  case  of,  300,  note  (/) 

FOREIGN  FIRM, 

service  of  writ  on,  266,  note  (o) 

income  tax,  when  payable  by,  394,  note  (c) 

liability  of,  to  Bankruptcy  law,  624,  note  (n) 
See  Alien 
FOREIGN  PRINCIPALS, 

agents  for,  contract  as  principals,  275,  note  (s) 

FORGERY 

by  one  partner,  liability  of  firm  in  case  of,  155.     And  ADDENDA 

FORM  OF  CONTRACT. 

effect  of  on  liability  of  partners,  176  et  seq. 

FORMS 

of  judgments  for  account,  517,  and  note  (n) 

of  order  when  sheriff  seizes,  362.     See  Seton  on  Decrees,  1214,  edition  4 

FRAUDS,  STATUTE  OF, 

effect  of,  on  contracts  of  partnership,  80 

as  regards  guarantees,  138 

excluded  by  part  performance,  81,  83 
share  in  partnership  not  within,  348 


INDEX.  861 

[The  paging  refers  to  the  [*]  pages.  ] 
FRAUD, 

liability  for  joint  and  several,  198,  702 
actions  to  rescind  contracts  on  the  ground  of,  482  et  seq. 
where  a  third  party  intervenes,  480,  490 
where  fraud  did  not  induce  the  contract,  481 
how  lost,  490 
actions  for  deceit,  and  other  actions  based  on,  163,  479  et  seq. 
parties  to  actions  relating  to,  284,  461 

principal  not  bound  by  contract  which  is  known  to  be  a  fraud,  148,  14f 
concealment  when  a,  480,  and  note  (m) 
bad  bargains  upheld,  there  being  no  fraud,  485 
reopening  accounts  for,  513 
release  set  aside  for,  145.  146 
bargains  between  outgoing  and  continuing  partners  set  aside  for,  486 

with  the  executors  of  a  deceased  partner  set  aside  for,  487  et  seq. 
on  faith  of  fraudulent  accounts  set  aside,  486 
effect  of,  on  right  to  contribution,  369 
on  person  holding  himself  out  as  partner,  effect  of,  on  his  liability  to 

creditors,  41 
right  of  proof  in  respect  of,  702 
whether  double  proof  allowed,  745,  749 

by  one  partner  on  another,  effect  of,  on  right  to  prove  in  bankruptcy 
against  joint  estate,  724 

separate  estates,  733-739 
on  creditors,  by  retiring  from  insolvent  firm,  573 

by  converting  joint  into  separate  property,  338,  698 
appointment  of  receiver  in  cases  of,  551 
recovery  of  premiums  in  cases  of,  64 
Statute  of  Limitations  in  cases  of,  259,  260 

concealed,  259,  511 
of  creditor,  effect  of,  as  regards  his  rights  against  retired  partner,  249 
of  one  partner,  liability  of  firm  for,  149,  160 

effect  of,  on  actions  by  firm  269 
of  firm,  liability  of  firm  in  case  of,  150  et  seq. 
of  agent,  liability  of  principal  for,  147 
of  infant,  75 

liability  of  estate  of  deceased  partner  for,  596 
estate  of  deceased  partner  not  released  by  dealings  with  survivors  where 

there  has  been,  252,  253 
effect  of,  on  agreements  between  partners  changing  joint  into  separate 

estate  and  vice  versa,  338,  698 
inducing  person  to  join  a  firm,  167,  482 
on  incoming  partners,  173 
effect  of,  on  doctrine  of  appropriation  of  payments,  235,  236 

discharge  of  the  estate  of  a  deceased  partner,  250 
partnership  formed  by,  no  defence  to  creditors,  103 
ground  of  dissolution,  580 
partnership  articles  construed  so  as  to  avoid,  406 

FRAUDULENT  ACCOUNTS, 

reopening,  487 

bargains  on  the  faith  of,  set  aside,  486 
FRAUDULENT  CONVEYANCES, 

are  acts  of  bankruptcy,  627,  628 

for  present  consideration,  629 

may  be  set  aside  after  lapse  of  three  months,  631 
FRAUDULENT  PREFERENCE,  628,  630,  653 

trustee  in  bankruptcy  may  disaffirm,  269,  653 

by  trustees,  630 


862  INDEX. 

[The  paging  refers  to  the  [*]  pages.] 
FRAUDULENT  STATEMENTS 

of  one  partner,  liability  of  firm  for,  162  et  seq. 
actions  for,  481 

as  to  solvency  of  another  do  not  bind  partner  unless  written,  138,  165 
as  to  authority,  481,  note  (p) 
See  Fraud. 

FREIGHT,  lien  on,  355 

FRIENDLY  SOCIETIES 

not  partnerships,  50,  note  (j) 

action  against  member  of,  for  money  belonging  to,  568,  note  (6) 

criminal  prosecution  of  members,  457,  note  (a) 

trustee  of,  may  petition  against  member  for  debt,  634 

FURNITURE, 

of  partners,  to  whom  it  belongs  in  the  event  of  bankruptcy,  684,  note  (r) 
office,  may  belong  to  one  partner  only,  329 

FUTURE  ADVANCES, 

securities  for,  effect  of  doctrines  of  merger  on,  256 
See  Capital 

FUTURE  PARTNERSHIPS,  20  etseq.  412 
Statute  of  Frauds,  effect  of,  on,  80 

GAIN, 

partnerships  not  having  gain  for  their  object,  2,  4,  note  (t),  50 

GAZETTE, 

partner  ordered  to  sign  advertisement  of  dissolution  for  insertion  in,  214 
notice  of  dissolution  in,  effect  of,  222 
See  Advertisements 

GENERAL 

and  particular  partnerships,  50 
powers  restricted  by  object,  407 

GOODS, 

actions  between  partners  relating  to,  560,  568 

liability  of  partners  for  goods  supplied  before  commencement  of  part- 
nership, 204 
pledge  of,  by  one  partner  when  binding  on  firm,  140 
purchases  of,  by  one  partner  on  credit  of  firm,  144 
return  of,  by  one  partner  when  binding  on  firm,  144 
sale  of,  by  one  partner  when  binding  on  firm,  146 

by  solvent  partner  when  binding  on  trustee  of  bankrupt  partner, 
568,  671 
held  for  special  purpose,  not  within  reputed  ownership  clause,  683 

GOODS  AND  CHATTELS, 

what  are,  within  the  meaning  of  the  rule  as  to  reputed  ownership,  678 

GOOD  DEBTS, 

agreement  as  to  bringing  in,  417 

GOOD  FAITH 

required  from  partners,  303  et  seq. 
agreement  to  observe,  418 

See  Fraud  ;  Honour 

GOOD-WILL 

nature  of,  439 

is  partnership  property,  327,  443 

sale  of,  for  share  in  profits  of  business,  36,  37 


INDEX.  863 

[The  paging  refers  to  the  [*]  pages.] 
GOOD-WILL— continued. 

sale  of,  as  a  going  concern,  558 

by  trustees  of  bankrupt  partner,  652 

effect  of  on  right  of  vender  to  carry  on  the  business  sold,  444,  558 
carries  right  to  use  old  firm  name,  446 
valuation  of,  447 
in  case  of  death,  443 

retirement  of  one  partner,  444 
in  connection  with  use  of  name,  444 

trade-mark,  114,  447 
agreements  as  to  paying  for,  415,  447 
property  within  meaning  of  Stamp  Acts,  439,  note  (a) 
legatee  of,  619 

duty  to  preserve,  443,  note  (q) 
how  far  it  survives,  342 

GROSS  PROFITS 

and  net  profits,  distinction  between  sharing,  7 

GROSS  RETURNS, 

distinction  between  sharing  profits  and  gross  returns,  8,  17 
sharing  does  not  constitute  partnership,  8,  17 
persons  who  share,  not  gwasj-partners,  29 
co-owners  sharing,  not  partners,  18 

GUARANTEE 

against  debts  given  to  incoming  partner,  418 
power  of  one  partner  to  bind  firm  by,  138 
ratification  of,  by  firm,  138 
as  to  solvency  when  required  to  be  written,  138,  165 

only  binds  parties  who  sign,  138 
joint  and  several,  179,  note  (v) 

HIGHER  NATURE 

extinction  of  debts  by  taking  securities  of,  255,  703 

HIGHWAYMEN, 

partnerships  between,  93,  note  (n) 

HOLDING  OUT 

as  partner,  40  el  seq.     See  Quasi-Paktnership 

meaning  of  phrase,  42 

what  constitutes.  42 

instances  of,  44 

but  not  to  plaintiff,  43 

sufficient  proof  of  quasi-partnership,  83 

by  not  preventing  use  of  name,  43 

by  signing  prospectus,  44 

where  firm  name  does  not  disclose  who  partners  are,  45.  46 

injunction  to  restrain,  544 

after  retirement  or  dissolution,  217,  note  (/<) 
by  one  partner  as  being  solely  concerned  in  a  contract,  effect  of,  179.  277 
effect  of  on  proof  in  competition  with  separate  creditors,  742,  note  (b) 
doctrine  of,  does  not  render  the  estate  of  deceased  partner  liable  to  third 

parties,  605 
effect  of,  as  regards  doctrine  of  reputed  ownership,  700 
effect  of  doctrine  of,  as  regards  torts,  47 
by  infant,  74 

after  coming  of  age,  73 
by  retiring  partner,  45,  216 

by  continuing  partners  of  bankrupt  co-partner,  212,  667 
by  surviving  partner,  46 


864  INDEX. 

[The  paging  refers  to  the  [*]  pages.] 
HOLDING  OUT— continued 

by  promoters  of  company,  45 
by  married  woman,  77 
limit  of  doctrine  of,  47 
joint  liability  in  case  of,  197 

HONOUR, 

higb  standard  of,  requisite  among  partners,  303 

those  about  to  become  partners,  303 
those  who  have  ceased  to  be  partners, 
303 

See  Feaud  ;  Good  faith 

HOUSES 

built  by  one  partner  on  partnership  property,  when  joint  estate,  330,  331 

HUSBAND 

of  partner,  liability  of,  78 

and  wife  partners  liability  of  in  bankruptcy,  78,  691,  note  (6),  730 
See  Maeried  Woman 

IDIOCY, 

dissolution  on,  577.     See  Lunacy 

IDIOTS, 

partners  who  are,  76.     See  Lunatics 

IGNORANCE 

of  one  partner,  effect  of,  on  rights  of  firm,  142.     See  Notice 
of  firm,  effect  of, 

in  case  of  misapplication  of  money  by  one  partner,  151  et  seq. 

in  other  cases,  172 

ILLEGAL  ACTS, 

injunction  to  restrain.     See  Injunction 
contribution  in  respect  of,  377 

ILLEGAL  PARTNERSHIPS,  Book  I.,  cap.  5 
what  partnerships  are  illegal,  91  et  seq. 
on  geueral  grounds,  92 — 94 
by  particular  statutes,  95  et  seq. 
attorniesand  solicitors,  95,  100 
bankers,  95,  97 
brokers,  97 
insurers,  97 

medical  practitioners,  98 
newspaper  proprietors,  99 
patentees,  99 
pawnbrokers,  99 
theatre  managers,  101 

unincorporated  companies  with  transferable  shares,  101 
unregistered  partnerships,  101 
consequences  of  illegality,  102.  585 

as  regards  the  right  to  recover  back  subscriptions,  106 
actions  for  account,  105 
actions  by  and  against,  103  et  seq. 
contribution,  104,  377,  378 
waiver  of  illegality,  104 
illegality  a  defence,  105, 106 

when  not  a  defence,  106 
set  up  by  executors,  106 
never  presumed,  91 
concealed  illegality,  106 


INDEX.  865 

[The  paging  refers  to  the  [*]  pages.  ] 
ILLEGAL  PARTNERSHIPS— continued. 

members  of,  have  no  lien,  355 

illegality  of  partnership  business,  a  cause  of  dissolution  of  partnership, 
585 

appointment  of  receiver  in  case  of,  552 

members  of,  liable  to  indictment,  109 
ILLEGAL  TRUSTS,  108 

actions  for  execution  of,  108 
ILLNESS 

of  partner,  when  a  ground  for  dissolution,  578 

IMPLIED  POWERS,  Book  II.,  cap.  1,  sees.  1  and  2 
of  partners,  124 — 128 
as  regards 

accounts,  128 

actions,  271,  272 

admissions,  128 

agents,  129 

arbitration,  129,  272 

banking  account,  129 

bills  and  notes,  129  et  seq. 

bonds,  131,  136,  137 

borrowing  money,  131,  321 

capital,  increasing,  132,  321 

cheques,  133 

post-dated,  133 

compromise,  136 

contracts,  134 

creditors'  deeds,  135,  631 

debts,  134 

deeds,  136 

distress,  137 

extension  of  business,  137,  315  et  seq. 

Factors'  acts,  140 

guarantees,  &c,  138 

insurances,  139 

interest,  139 

judicial  proceedings,  139,  271,  272 

leases,  139 

mortgages,  139 

payment,  134 

pledges  of  chattels,  140 

notices,  141,  214,  571 

penalties,  143 
t  purchases,  144 

receipts,  145 

releases  and  covenants  not  to  sue,  145 

representations  and  admissions,  146 

sales,  146 

taking  security,  141 

servants,  147 

set-off,  136 

ships,  147 

tenders,  136 

transfer  of  debts,  135 

varying  contracts,  134 

winding  up,  217,  218 
termination  of 

by  notice,  210,  571 
*  32  LAW   OF   PARTNERSHIP. 


866  INDEX. 

[The  paging  refers  to  the  [*]  pages.] 
IMPLIED  POWERS— continued. 
termination  of — continued. 
by  death,  211 
by  bankruptcy.  212.  666 
effect  of  holding  out  on.     See  HOLDING  Out 
See  Bankruptcy  ;  Dissolution 
IMPLIED  TERM 

for  duration  of  partnership,  122 

IMPOSSIBILITY 

of  continuing  partnership  business  cause  of  dissolution,  575,  581 

IMPUTATION  OF  PAYMENTS,  225  et  seq.     See  Appropriation  of  Pay- 
ments 

INCAPACITATED  PARTNER,  71 

INCHOATE  COMPANIES, 

subscribers  to,  not  partners,  23 
See  Promoters 

INCOME-TAX, 

on  what  profits  payable,  394,  note  (c) 

payment  of,  by  firm,  where  some  of  its  members  are  abroad,  394,  note  (c) 

INCOMING  PARTNER, 

actions  by  and  against,  239  et  seq.,  285  et  seq. 
agreements  for  benefit  of,  433 
liability  of,  205 

under  old  articles,  435 

for  bills  accepted  for  precontracted  debt,  209 

for  acts  done  before  they  join  firm,  208 

how  established,  208 
frauds  on,  173,  209,  479  et  seq. 
effect  of  appropriation  of  payments  on,  230 

notice  of  previous  transactions,  on,  143 

INCORPORATION. 

effect  of,  as  regards  sureties,  118 

INCREASING  CAPITAL, 

difference  between,  and  borrowing,  132,  133,  321 
See  Capital 

INDEMNITY. 

against  losses,  15,  63 
agent's  right  to.  369  et  seq. 

when  he  obeys  his  instructions,  370 

when  he  disobeys  his  instructions,  370 

when  he  acts  after  his  authority  is  revoked,  371 

when  he  acts  without  instructions,  371 
right  of  partners  to,  369  et  st  q. 
right  of  trustees  to,  373 
right  to,  where  a  person  has  been  induced  to  become  a  partner  by  fraud, 

484 
extent  of,  484 

before  loss  has  been  sustained,  374,  and  Add. 
right  of  out-going  partner  to,  from  continuing  partners,  451 
usually  given  by  continuing  partners,  450 
should  be  joint  and  several,  450 
at  law  and  in  equity,  former  difference  between,  374 
action  for,  by  one  partner  against  another,  566 
given  by  one  partner,  how  far  firm  is  bound  by,  138 


INDEX.  867 

[The  paging  refers  to  the  [*]  pages.  ] 
INDEMNIT  Y— continued. 

dissentient  need  not  accept,  318 
effect  of  taking  joint  covenant  for,  199 

persons  entitled  to  may  prove  in  bankruptcy,  when,  708,  note  (y) 
effect  of,  on  lien,  451 

of  executors  of  deceased  partners  when  acting  under  the  order  of  the 

court.  594 
when  trading  with  assets  of  testator 
under  directions  in  the  will,  606 
See,  also,  Contribution 
INDIA, 

allowances  to  partners  in,  381 

INDIAN  CONTRACT  ACT, 

definition  of  partnership  in,  3 

division  of  partnerships  in,  into  ordinary  and  extraordinary,  4 

INDICTMENT 

by  one  partner  against  another,  457,  note  (a) 

by  surviving  partners  and  the  executors  of  a  deceased  partner,  288, 

note  (z) 
for  illegal  partnership,  109 
INFANT 

partners,  74 

liability  of  for  holding  himself  out  as  partner,  74,  76 
after  coming  of  age,  76 
to  be  made  bankrupt,  75,  6*24,  note  (re) 
sued  with  other  partners,  280,  281 
for  acts  of  others,  74,  75 
for  fraud,  75 

should  not  be  joined  in  action  against  the  firm,  74,  note  (c) 
avoidance  of  contracts  by,  75 
ratification  of  contract  by,  76 
sale  of  share  of,  in  partnership,  557 
Infants  Relief  act,  1874,  76 

INFORMATION.     See  Action 

duty  of  partners  to  give,  303 
effect  of  withholding,  304,  note  (/) 
INJUNCTION 

generally,  538  et  seq. 

necessity  of,  538 

granted  where  a  receiver  would  be  refused,  539 

between  co-owners,  59,  62 

against  partners  where  no  dissolution  is  sought,  539 

where  partnership  is  at  will,  540 

in  actions  for  dissolution,  541 
against  persons  claiming  under  a  late  partner,  542 
to  restrain 

actions.  543 

for  balance  of  settled  account  because  others  are  unsettled.  543 
ejectment,  541 

executions  against  firm  for  separate  debt  of  one  partner,  359 

advertising  dissolution,  539 

alteration  in  principle  on  which  profits  dealt  with,  319 

change  in  character  of  business,  316 

majority,  317 

holding  out,  544 

opening  letters,  539,  542,  note  (e) 

using  names,  114,  539 


868  INDEX. 

[The  paging  refers  to  the  [*]  pages.] 
INJUNCTION— continued. 
to  restrain — continued. 
using  names  by  continuing  partners,  114,  217,  note  (h),  605 

by  successors  in  business,  445 
misapplying  monies  of  firm,  540 
obstructing  plaintiff  in  the  exercise  of  his  rights,  540 
carrying  on  a  particular  branch  of  the  business,  540 
driving  plaintiff  to  a  dissolution  by  misconduct,  540 
publishing  news  in  a  rival  paper,  540,  541 
writing  plays  for  rival  theatre,  541 
getting  in  partnership  assets,  542 
negotiating  bills,  &c,  542 
misconduct,  543 

withholding  partnership  books,  542,  544,  note  (t) 
breaches  of  express  agreements,  542,  543 
carrying  on  business,  543 

save  for  winding  up.  541 

after  a  dissolution,  541 

after  sale  of  business,  542 

by  surviving  partners  in  old  name,  217,  note  (h),  445,  605 
interfering  with  proper  Avinding  up  of  partnership,  588 
against  dissolution  of  partnership  when  granted,  571 
divulging  trade  secrets,  543 
publishing  accounts,  542,  note  (e) 

making  slanderous  statements,  542,  note  (e),  544,  note  (x) 
excluding  co-partner,  395,  540,  543 

though  lately  insane,  539 
proceedings  in  bankruptcy,  636,  note  (x) 
managing  partners,  466,  544 
illegal  acts,  539 
renewal  of  lease,  307,  note  (s) 
parties  to  actions  for,  461 

must  come  with  clean  hands,  544 

INQUIRIES 

directed  in  j  udgment  for  administration  of  estate  of  deceased  partner,  600 
additional,  when  added,  69,  607 

INSANITY, 

a  ground  for  dissolution,  577  et  seq.     See  Lunacy  and  Lunatic 

INSOLVENCY 

of  partner,  power  to  dissolve  in  case  of,  425,  576 

test  of,  425 
of  firm,  meaning  of,  425,  note  (k) 

See  Bankruptcy 

INSPECTION.     See  Books  ;  Discovery 
of  accounts,  &c,  of  firm,  404 

agreement  precluding,  504 

by  agent,  504 

by  accountants,  &c,  504 
of  books  in  use,  505 
in  actions  for  account,  504 

INSPECTORS, 

appointment  of,  in  bankruptcy,  645 

INSPECTORSHIP  DEED,  754 

trustees  of,  not  partners,  21 

INSTRUCTIONS, 

agent  disobeying,  effect  of  on  idemnity,  370 


INDEX.  869 

[The  paging  refers  to  the  ["]  pages.]  , 
INSURANCE, 

power  of  one  partner  to  bind  firm  by,  139 
marine,  97.     See  Marine  Insurance 

INSURANCE  COMPANIES 

maritime,  formerly  illegal,  97 

INTEREST 

admission  by  one  partner  that  interest  is  payable,  139 

in  accounts  between  partners,  389 

on  capital,  389 

where  capital  payable  out  by  instalments,  390,  note  (o) 

on  undrawn  profits,  390 

on  advances,  390 

on  overdrawings,  390 

where  accounts  confused,  392 

charged  against  partner  who  will  not  produce  books,  538 

on  arrears  of  a  share  of  profits,  390,  note  (jj),*395 

where  firm  claims  what  has  been  obtained  by  one  partner,  391 

agreements  as  to  payment  of,  418 

on  money  wrongfully  employed  in  partnership  business,  521  et  seq. 

when  compound  interest  allowed,  390,  note  (s),  531 

charging  executors  with,  for  not  converting  testator's  share  into  money, 
615 

separate  creditors  entitled  to,  up  to  date  of  receiving  order,  against  joint 
creditors,  730,  and  note  (n) 

joint  creditors  entitled  to,  up  to  date  of  receiving  order,  as  against  sepa- 
rate creditors,  720 

on  debts  in  bankruptcy,  719,  720,  730,  note  (n) 

paid  by  continuing  partners  after  dissolution  does  not  discharge  retired 
partner,  243,  246,  250,  251 

as  to  appropriation  of  securities  to,  720,  note  (n) 

INTERNAL  REGULATION, 

interference  of  Court  with  respect  to  matters  of,  464  et  seq. 
See  Majority 

INTERPLEADER, 

sheriff's  right  to,  358,  note  (q),  362 

order  that  sheriff  withdraw,  is  a  stay,  625,  note  (u) 

INTERPRETATION 

of  partnership  articles,  406  et  seq. 
See  Articles  of  Partnership 

INTERROGATORIES, 
oppressive,  502 
as  to  acts  of  agents,  502 

duty  to  make  inquiries  as  to  subject-matter  of,  502 
See  Discovery 

INTRODUCTION 

of  new  partner,  provision  as  to,  433 

INVOICE 

evidencing  partnership,  89 

I  O  U, 

action  by  one  partner  against  another  on,  565 

ISSUE 

to  try  partnership,  83,  note  (n) 

JOINDER  OF  PARTIES.     See  Abatement  ;  Actions  ;  Parties. 


870 


INDEX. 


[The  paging  refers  to  the  [»]  pages.]  ] 
JOINT  ADJUDICATIONS 

of  bankruptcy,  637.     See  Bankruptcy 

rules  as  to,  632 
JOINT  BOND, 

held  joint  and  several,  when,  194  et  seq.,  437,  note  (o),  and  Addenda 

held  separate  only,  when,  137 

JOINT  COVENANTS, 

when  not  held  joiut  and  several,  193 

when  held  joint  and  several,  437,  note  (o),  and  see  Addenda 

JOINT  CREDITORS, 

who  are,  701  et  seq. 

proof  by,  in  bankruptcy  against  the  joint  estate,  692,  720 

separate  estate,  729 
against  both  estates,  747 
when  secured,  709,  714,  749 
when  treated  as  joint  and  several,  194  et  seq. 

in  bankruptcy,  743 
paying  off  separate  creditors,  733 
rights  of,  against  estate  of  deceased  partner,  598 
position  of  executors  of  deceased  partners  as  regards,  594 
See  Bankruptcy  ;  Deceased  Partner  ;  Joint  Debts 
JOINT  DAMAGE, 

when  necessary  to  support  joint  action,  278 

JOINT  DEBTS.     See  Bankruptcy 
what  are,  702 

when  treated  as  joint  and  several,  194  et  seq.,  743 
bills.  180.  702 
frauds,  199,  702 
breaches  of  trust,  702 

money  of  which  firm  has  had  benefit,  189,  703,  721 
conversion  into  separate,  703 
cannot  be  set  off  against  separate,  291  etseq.,  660 

unless  there  is  an  agreement  to  that  effect,  661 
effect  of  order  of  discharge  of  one  bankrupt  debtor  on,  752 
will  support  separate  adjudication,  637 

composition  for,  does  not  release  separate  liability  when,  238 
how  paid,  598 

See  Joint  Creditors 

JOINT  DIVIDENDS, 

declaration  of  in  bankruptcy,  693 
JOINT  ESTATE, 

what  is,  323.     See  Property 

in  cases  of  holding  out,  197,  700 

conversion  ot,  into  separate,  334,  698 

effect  of  doctrine  of  reputed  ownership  on,  684,  732 

importance  of  distinguishing  from  separate,  322 

distinct  account  of,  to  be  kept  in  bankruptcy,  693 

consolidation  of,  with  separate  estates,  695 

proof  against,  720 

by  joint  and  separate  creditors,  701 

proof  against,  by  married  woman,  lending  money  to  husband  partner,  730 

is  distributed  without  reference  to  the  partners'  interest  in  it,  701 

distribution  of  surplus  of,  728,  742 

absence  of,  confers  a  right  of  proof  against  separate  estates,  731 

rule  as  to,  in  bankruptcy,  692,  693,  697 

mortgage  of  for  separate  debt,  when  an  act  of  bankruptcy,  631 


INDEX.  S71 

[The  paging  refers  to  the  ["1  pages.] 
JOINT  ESTATE— continued. 

may  be  treated  as  separate,  when,  684 
assets  brought  in  in  breach  of  trust  not  part  of,  724 
costs  of  trustee  when  paid  out  of,  694 
remuneration  of  trustee  when  paid  out  of,  694 
See,  also,  Bankruptcy 

JOINT  OBLIGATION, 

performance  of  224 
extinction  of,  224 

by  merger  in  security  of  higher  nature,  255,   703.      And  see  the 

Addenda 
effect  of  release  on,  237 
effect  of  covenant  not  to  sue  on,  237 
See  Joint  and  Several 

JOINT  PURCHASES 

of  goods  for  sale,  53 

of  goods  not  for  sale,  53 

JOINT  AND  SEPARATE  CREDITOR.     See  Joint  Creditor 
holding  security,  749 
proof  in  bankruptcy  by,  701 

JOINT  AND  SEVERAL, 

when  partnership  debts  are,  192.  193,  702 

rule  applies  between  creditors,  195 
contracts,  who  to  be  sued  on,  280,  288 

persons  liable  on,  may  be  sued  jointly,  severally,  or  in  the  alterna- 
tive, 265,  282 

executors  of  deceased  partners  may  be  joined,  288 
debts,  merger  of,  in  higher  securities,  255,  703 
liability 

on  contracts,  193 

for  torts  and  frauds,  198,  702 

for  breaches  of  trust,  199,  200,  702 

on  promissory  notes,  187 

on  bills,  180,  702 

power  of  one  partner  to  bind  firm  by,  130 
receipt  of  composition  on  joint  debt,  effect  of  on  separate  liability,  238 

JOINT  STOCK 

not  essential  to  partnership,  12,  13 

JOINT  TENANCY, 

or  tenancy  in  common,  what  creates,  51,  note  (n) 

JOINT  TENANTS 

partners  in  profits  only,  53 
remedies  between,  57 — 62 

JUDGMENT 

when  the  Court  can  go  behind,  703,  note  (b) 

extinguishes  debt  for  which  it  is  obtained,  255,  703,  704.  And  Addenda 

not  if  it  is  a  colonial  judgment,  255,  note  (s) 
against  some  partners,  effect  oi,  as  regards  the  others,  193,  255,  256 

as  regards  a  dormant  partner,  255,  note  (s) 
against  firm  when  judgment  against  a  member,  625,  note  (w) 

power  of  one  partner  to  consent  to,  272 
against  surviving  partners,  effect  of  as  regards  estate  of  deceased  partner, 

195,  603 
against  estate  of  deceased  partner,  effect  of  as  regards  surviving  partners, 
195,  603 


872  INDEX. 

[The  paging  refers  to  the  [*]  pages.] 
JUDGMENT— continued. 

effect  of  on  proof  in  bankruptcy,  703 
dissolution  dates  from  when,  572 

where  lunacy,  579 
where  misconduct,  582 
form  of,  for  partnership  account,  516,  517,  note  (n) 
form  of,  in  action  by  joint  creditors  against  executor  of  deceased  partner, 

600 
on  sale  of  partner's  share  by  sheriff.     Seton  on  Decrees,  1214,  n.,  ed.  4 
additional  inquiries  when  added  to,  69,  601 
may  be  entered  up  against  partners  in  name  of  firm,  266,  298 

how  execution  issues  where,  299,  300 
action  founded  on,  300 
debtor  summons  ou,  when,  300 
execution  of.     See  Execution 
as  to  mode  of  entering  up,  266 

JUDICIAL  PROCEEDINGS, 

power  of  one  partner  to  act  for  firm  in,  139,  271 
See  Action  ;  Bankruptcy 

JUDICATURE  ACTS, 

effect  of,  as  regards  parties  to  actions,  264  et  seq.,  458 
appointment  of  receivers,  546 
administrations.     Addenda 

JURISDICTION, 

of  Court  in  bankruptcy,  645,  and  note  (y) 

JURY, 

to  try  partnership,  83 

JUST  ALLOWANCES,  519 

KENT, 

his  definition  of  partnership,  3 

KNOWLEDGE  . 

effect  of,  where  breach  of  trust,  161 

as  regards  actions  for  misrepresentation  and  fraud,  163,  481 
See,  also,  Notice 
LACHES 

of  plaintiff,  when  a  bar  to  relief,  466 

barring  right  to  account,  467 

in  setting  aside  agreements,  467 

in  cases  of  mining  partnerships,  468 

when  not  a  bar,  471  et  seq. 

demurrer  on  ground  of,  475 

effect  of  recognition  of  title  on,  474 

of  one  partner  in  asserting  his  rights,  effect  of,  304 

LAND, 

proof  of  a  partnership  in,  81 

belonging  to  firm  treated  as  personal  estate,  343  et  seq. 

when  partnership  property,  331 — 333 

when  not,  334,  343 

vests  in  trustee  in  bankruptcy,  651 

LAPSE  OF  TIME.     See  Delay  ;  Limitations,  Statute  of  ;  Time 
LARCENY 

of  property  of  firm  by  partner,  456,  457,  note  (a) 

LAW, 

mistakes  of,  when  corrected  in  accounts,  514 


INDEX.  873 

[The  paging  refers  to  the  [*]  pages.] 

LAW  AND  EQUITY.     See  Equity 
difference  between 

as  regards  contribution  and  indemnity,  374.     See  Contribution 
as  regards  joint  and  several  liabilities,  193 

LEASE, 

specific  performance  of  agreement  for,  after  term  is  expired,  476 
injunction  against  grant  of  renewed,  to  one  partner,  496,  note  (o) 
power  of  one  partner  to  take  a  lease  for  a  firm,  139,  315 

to  distrain,  137 
liability  of  retired  partners  on  covenants  in,  240,  note  {a) 
of  partnership  property,  effect  of,  on  duration  of  partnership,  121 
of  business  permises  when  partnership  property,  326,  328 
of  mines,  328,  note  [t) 
of  salt  works,  329,  note  (a) 

renewal  of,  by  one  partner  enures  to  benefit  of  firm,  307 
notice  to  quit  by  partners,  279,  562 
forfeiture  of,  by  assignment  by  one  partner  to  another  without  license, 

336,  note  (z) 
right  of  partner  to  reject  renewal  of,  308,  309 
right  to  retain  benefit  of  renewed,  on  dissolution,  571,  note  (g) 
not  within  doctrine  of  reputed  ownership,  678 

LEGACY 

of  share  in  partnership, 

rights  of  legatee,  619.     See  Legatee 
ademption  of,  620 
what  passes  under,  340,  619 
duty  of  executors  to  realize,  615,  620 

income  of,  as  between  tenant  for  life,  and  remainderman,  620 
right  of  specific  legatee  to  profits,  620,  621 
if  declared  after  death,  621 
.  not  to  other  profits,  621 

as  to  dividends  and  bonuses,  621 
of  goodwill,  439,  note  (6),  619 
to  partner  indebted  to  testator,  620 
to  a  firm,  113 

LEGACY  DUTY, 

payable  on  partner's  share  of  assets,  347,  and  note  (a) 

LEGALITY. 

See  Illegality 

LEGAL  PROCEEDINGS, 

firm  how  described  in,  115,  116,  265,  274 
by  and  against  firm,  115,  116,  264  elseq. 
power  of  one  partner  to  act  for  firm  in,  271,  272 
See  Actions  ;  Bankruptcy 

LEGATEE 

of  a  deceased  partner 

what  passes  to,  340,  619,  620 
rights  of,  against  his  executors,  612,  616,  619 
the  surviving  partners,  610 
to  an  account,  494 

when  there  is  collusion,  494 
where  the  assets  of  the  deceased  are  not  got  in,  614  etscq. 
where  the  surviving  partners  are  the  executors  of  the  deceased,  528,  614 
of  goodwill,  439.  note  (6),  619 
where  tenant  for  life  and  remainderman,  620 
See  Legacy 


874  INDEX. 

[The  paging  refers  to  the  [*]  pages.] 

LENDER, 

distinction  between  and  partner,  16,  37.     And  see  the  ADDENDA 

LETTERS, 

injunction  to  restrain  opening,  539,  542,  note  (e) 
evidence  of  partnership,  89 

LIABILITY 

oi'  partners 
inter se.    See  Account;  Action  ;  Contribution 
for  the  acts  of  each  other,  128  ef.  seq.      See  Implied  Powers 
of  individval  partners  on  contract  in  excess  of  their  powers,  192 

when  acting  and  dealt  with  on  their  own  account, 
179 
by  holding  out,  40  et  seq.     See  Holding  out 
by  sharing  profits,  2.5 — 46.     See  Profits 

statute  as  to,  35 
in  respect  of 

dealings  of  co-partner  before  execution  of  partnership  articles,  202 

before  joining  the  firm,  202 
unauthorised  transactions,  126,  167 

with  notice,  167 
torts  and  frauds    147  et  seq.,  702 
breaches  of  trust,  160— 162.  199,  200 
misapplication  of  money,  150 — 162 
misrepresentations,  162,  479 

bills  of  exchange  in  various  forms,  180  etseq.,  702,  709  et  seq. 
See  Bills  of  Exchange 
promissory  notes,  187 

See  Promissory  Notes 
contracts  under  seal,  177 

not  under  seal,  177 

not   binding  on  them,  but  of  which  they  have  had  the 

benefit,  189  et  seq. 
in  which  all  the  partners  are  not  named,  213,  275 
when  joint  and  when  several, 
as  regards  contracts,  192 
torts,  198.  702 

breaches  of  trust,  161,  199   200 
in  cases  of  holding  out,  197 
commencement  of,  201  et  seq. 
extent  of,  200 

limited.    See  Limited  Liability 
termination  of,  210,  223 
as  to  future  acts,  210 

by  notice  of  dissolution,  214.     See  Dissolution 
by  dissolution  without  notice,  213 
effect  of  notice,  210  et  seq. 

what  amounts  to  notice,  221  et  seq.,  428,  571,  679 
by  death,  211 
by  bankruptcy,  212 
effect  of  lunacy  as  regards,  213 
holding  out,  216 
as  to  past  acts,  223 
by  payment,  225 

See  Appropriation  of  Payments 
by  release,  237 

by  dealings  with  continuing  partners,  243  et  seq. 
by  the  merger  of  securities,  254,  703 
by  lapse  of  time,  257.     See  Limitations,  Statute  of 


INDEX.  875 

[The  paging  refers  to  the  [*]  pages.  ] 
LI  ABILITY— continued 

as  to  past  acts — continued. 

by  death,  223,  594  et  seq.     And  see  Death 
by  bankruptcy,  223.     And  see  Bankruptcy 
by  judgment  against  co-partner,  193,  255,  703.     And  Addenda 
attempts  to  limit,  201 

effect  of  notice  of  agreement  limiting,  176,  201 
creditors  not  affected  b}'  agreements  between  the  partners,  239  et  seq. 

unless  they  have  notice,  176.     And  see  Notice 
of  dormant  partner,  125,  178.     See  Dormant  Partner 
of  incoming  partner,  205.     See  Incoming  Partner 
of  nominal  partner.     See  Holding  out  ;  Nominal  Partner  ;  Quasi- 

Partnership 
of  retired  partner, 

dormant,  212,  214,  229 
not  dormant,  213 
of  estate  of  deceased  partner,  594   et  seq.     See  Deceased  Partner  ; 

Executors 
of  executors  of  deceased  partner,  604.     See  Executors 

for  breach  of  trust  in  employing  assets  in  the  business 
of  a  partnership,  604  et  seq . 
of  promoters.     See  Promoters 

of  agent  who  exceeds  his  authority,  192,  370.     And  see  Agent 
of  principal  for  torts  and  frauds  of  his  agent,  147 
of  shipowners  in  respect  of  each  other's  acts,  147,  note  (y) 
meaning  of,  in  bankruptcy,  708 
proof  in  respect  of  what,  in  bankruptcy,  708 

LIBEL, 

actions  by  partners  for,  278 

LICENSES, 

form  of  when  no  evidence  of  partnership,  85 
not  taking  out.     See  Excise  Laws 

LIEN, 

of  partners, 

nature  of,  351  et  seq 

consequences  of,  352 

to  what  property  it  attaches,  352 

exists  only  on  partnership  assets,  353 

exists  as  against  all  persons  claiming  a  share  in  the  assets,  353,  354 

prevail  as  against  assignee  or  mortgagee,  353 

no  lien  on  a  partner's  share  for  ordinary  debts  due  from  him  to  firm,  354 

loss  of,  355 

no  lien  of  partnership  is  illegal,  355 

available  against  trustee  of  bankrupt  partners,  647 

of  partner  must  be  satisfied  before  a  partner  proves  against  his  co- 
partner, 741 

proof  for  what  is  not  satisfied  by,  741 

of  a  firm,  effect  on,  where  a  change  occurs  in  the  firm,  120 

effect  of  express  indemnity  on.   151 
on  funds  appropriated  for  payment  of  particular  bills,  656,  note  {x) 
effect  of  doctrine  of  reputed  ownership  on,  679,  684 
creditors  of  a  firm  have  no  lien  on  its  property,  334,  354,  698 
on  partnership  assets  in  cases  of  rescission  of  contract  for  fraud,  484 
of  co-owners,  60,  355 

LIMITATIONS,  STATUTE  OF, 

between  partners,  508;  non-partners,  257 
when  not  a  defence,  470,  note  (c) 


876  INDEX. 

[T«he  paging  refers  to  the  [*]  pages.] 

LIMITATIONS,  STATUTE  OF,— continued. 

estate  of  deceased  partner,  when  discharged  by,  597 
when  a  bar  to  an  action  for  account  between  partners,  &c,  508 
time  within  which  actions  must  be  brought,  257,  258 
summary  of  rules  relating  to,  259 

provisions  of  Mercantile  law  amendment  act  as  to,  262,  509 
merchants'  accounts,  509 
current  accounts,  509 
acknowledgment,  260,  and  note  (a),  511 
payment  by  receiver  in  an  action,  511 
cases  of  fraud,  260,  511 
trust,  260,  511 
act  of  one  partner,  effect  of,  261,  and  note  (g) 

LIMITED  LIABILITY 

in  partnership  does  not  exist,  200 
attempts  to  introduce,  201 

by  stipulating  that  funds  only  shall  be  liable,  201 

by  notice  of  terms  of  partnership,  176 
under  Bovill's  act,  35  et  seq.,  201 

LIQUIDATED  DAMAGES, 

agreements  for  payment  of,  454 

LIQUIDATOR, 

notice  to,  notice  to  company,  680,  note  (x) 

LIS  PENDENS, 

plea  of,  256,  note  (y) 

LOANS 

to  a  firm  by  trustees  after  the  partners  are  changed,  113 
to  one  partner,  of  which  firm  has  had  the  benefit,  189  et  seq. 

firm  is  bound,  when,  131,  132,  191 
by  partner  to  firm,  384 
contracts  of  loan  compared  with  contracts  of  partnership,  15,  16,37  et  seq., 

and  Add. 
at  interest  varying  with  profits,  30.  35 
for  share  of  profits,  if  fraudulent,  may  constitute  a  partnership,  37 

or  if  lender  is  not  merely  a  creditor,  37 
by  executors  of  deceased  partner  to  firm,  gives  the  estate  no  right  to  pro- 
fits, 615 
distinguished  from  capital,  320 
action  to  recover,  between  partners,  564 

And  see  Advances 

LOOKING  ON, 

effect  of,  as  a  bar  to  relief  466  et  seq.     See  Laches 

LOSS  OF  CAPITAL, 

effect  of,  321,  403 

when  a  cause  of  dissolution,  576 

how  shared,  350,  403 

LOSSES, 

stipulation  against,  15 

effect  of  notice  of,  by  creditors,  201,  385 
indemnity  against,  63 
as  to  payment  of,  25 — 48,  385 
attributable  to  one  partner,  386,  387 
adopted  bv  firm,  388  . 

how  to  be' borne,  385,  402,  403 
as  between  tenant  for  life  and  remainderman,  621 
See  Contribution;  Partnership;  Profits 


INDEX.  877 

[The  paging  refers  to  the  [*]  pages.] 

LUNACY 

of  partner,  effect  of,  as  regards  liability  of  himself  and  co-partners,  213 

a  ground  for  dissolution,  577 

date  of  dissolution  in  case  of,  579 

costs  of  payable  out  of  partnership  assets,  579 

sale  of  share  in  partnership,  in  case  of,  553,  556 

receiver  and  manager  in  case  of,  553 

does  not  prevent  a  dissolution  by  notice,  425,  426,  579 

evidence  of,  578 
partner  recovering  from,  entitled  to  take  part  in  business  of  the  firm,539 
apportionment  of  premium,  whether  ground  for,  67 

LUNACY  REGULATION  ACT,  579 

LUNATIC 

may  be  a  partner,  76 

service  of  notice  of  dissolution  on,  424,  579 
service  of  writ  on,  266,  note  (o) 
partner  becoming  a  cause  for  dissolution,  577 
entitled  to  sue  for  dissolution,  579 

when  entitled  to  share  of  profits  made  since  dissolution,  527 
effect  of  Bankruptcy  act,  1883,  on,  624,  note  (») 
MAJORITY, 

powers  of,  313  et  seq. 

in  matters  of  ordinary  business.  314 
instances  of  what  it  cannot  lawfully  do,  314 
cannot  alter  principle  on  which  profits  are  to  be  divided,  319 
change  nature  of  business,  315 
sell  shares  of  minority,  407 
agreements  as  to,  313,  419 
to  bind  minority,  318 

duty  of,  to  hear  minority,  315 
after  a  dissolution,  218 
account  settled  by,  binding  on  minority,  512,  note  (d) 
See  Injunction 

MALA  PROHIBITA 

and  mala  in  se,  94 

MALICIOUS  INJURY, 

liability  of  firm  for,  149 

MANAGEMENT, 

interference  by  court  in  matters  of  internal,  466  et  seq. 
of  affairs  of  partnership,  right  to  take  part  in,  301 

if  no  agreement  to  the  contrary,  10,  301 
expenses  of,  how  paid,  380  et  seq.,  418 

See,  also,  Ix junction;  Majority 

MANAGER 

and  receiver,  appointment  of,  545.     See  RECEIVER 
at  instance  of  co-owner,  59,  62,  548 

difference  between  receiver  and,  545,  547 

sharing  profits,  when  a  partner,  10,  13 

partner  appointed  when,  553 
MANAGING  COMMITTEE, 

liability  of  members  of,  for  each  other's  acts,  45 
See  Promoters 
MANAGING  PARTNER, 

interference  with,  by  the  court,  466,  544 

right  of,  to  salary  or  commission,  380,  and  note  (n) 


878  INDEX. 

[The  paging  refers  to  the  [*]  pages.  ] 

MANIFEST  ERRORS, 

clause  as  to,  420,  421 

See  Accounts;  Mistake 

MARINE  INSURANCE, 

partnerships  for,  formerly  illegal,  97,  98 
agreements  for,  must  be  in  writing,  80,  98,  note  (i) 

may  be  stamped  after  execution,  98,  note  (i) 

MARRIAGE 

of  female  partner,  dissolution  of  partnership  by,  583 

MARRIED  WOMAN, 

capacity  of,  to  be  a  partner,  77 

where  no  separate  estate,  78 
where  she  has  separate  estate,  79 
liable  to  Bankruptcy  law  when,  78,  624,  note  (n).     And  Addenda 
Married  woman's  property  act,  78 

rights  of,  in  partnership  with  her  husband  upon  his  bankruptcy,  78,  691, 
note  (b) 
See,  also,  Husband 
loan  by,  to  husband,  for  purposes  of  trade,  78 
proof  for,  as  joint  creditor,  701,  note  (I),  730 

MARSHALLING, 

assets  of  bankrupt  partners,  717,  718 

equitable  doctrine  of,  applies  in  bankruptcy,  661,  note  (x) 

MAXIMS, 

Accessorium  sequitur  stium  principale,  522 

Actio  personalis  moritur  cum  persona.  595 

Culpa  est  immiscere  se,  rei  ad  se  non  pertinenti,  372 

Ex  turpi  causd  non  oritur  actio,  103,  108 

Expressio  unius  est  exclusio  alterious,  406  note  (6) 

Expression  facit  ccssare  taciturn,  406 

In  pari  delicto  mclior  est  positio  defendentis,  370 

In  re  communi  potior  est  conditio  prohibentis,  314 

In  societalis  contractions,  fides  exuberet,  303 

Jus  accrescendi  inter  mercatores  locum  non  habet,  340,  591 

Nemo  debet  bis  vexari  pro  eadem  causd.  256 

Nemo  potest  mulare  consilium  suum  in  alterius  injuriam,  371 

3Iodus  et  conventio  vincunt  legem,  408 

Prot cstatio  facto  contraria  non  valet,  41 

Ees  inter  alios  acta,  239,  512,  note  (d) 

Respondeat  superior,  148 

Semper  enim  non  id  quod  privatim  interest  unius  ex  sociis  servari  solet,  sed 

quod  societati  expedit,  305 
Si  quid    societati    debetur    singulis    debetur   et   quod  debet   societas    singuli 

debent,  5 
Si  quid  universitati  debetur  singulis  non  debetur,  nee  quod  debet  universitas 

singuli  debent,  5 
Socius  mei  socii,  socms  mens  non  est,  48 
Vigilantibus  non  dormientibus  subveniunt  leges,  467. 

MEDICAL  PRACTITIONERS, 

partnership  between  unqualified,  98 

MEETINGS, 

attending,  evidence  of  partnership,  90 

MEMBERS, 

of  partnerships,  see  Firm;  Partners 


INDEX.  879 

[The  paging  refers  to  the  [*]  pages.  ] 
MEMORANDA, 

evidence  of  partnership,  89 

when  unsigned,  81,  note  (c) 

MERCANTILE  LAW  AMENDMENT  ACT, 
as  to  sureties,  119 
as  regards  Statutes  of  Limitation,  262,  263,  509 

MERCHANTS, 

custom  of,  as  to  payment  of  interest,  389 

MERCHANTS'  ACCOUNTS, 

provisions  of  Statutes  of  Limitation  as  to,  259,  509 
See,  also,  Accounts 
MERGER 

of  debts  and  securities,  254,  703 

by  judgment  recovered,  255,  703.     And  Addenda 

by  taking  security  of  a  higher  nature,  225.     And  Addenda 

unless  security  only  collateral,  255 
by  taking  bills,  254,  702 
of  securities  in  bankruptcy,  703 
of  joint  and  several  obligations,  256 
effect  of,  on  securities  for  further  advances,  256 
as  to  joint  bonds  given  for  joint  and  several  debts,  256 
effect  of,  on  creditor  petitioning  for  an  adjudication  of  bankruptcy,  257 
not  an  extinction  of  the  debt,  257 
MINES, 

verbal  agreements  as  to,  82 
devisees  of,  how  far  partners,  333 
co-owners  of,  54 

when  partners,  55,  328,  note  (t) 
partner  in  coal  mines  may  not  be  an  inspector  of,  117 
appointment  of  receiver  and  manager  of,  55,  552 

as  against  mortgagee,  553 
account  of  profits  of,  498 

by  assignee  or  mortgagee  of  share,  493 
without  dissolution,  498 
laches  a  bar  to  relief  concerning,  468 
transfer  of  shares  in,  56,  366 
shares  in,  within  Mortmain  acts,  348 

not  within  Statute  of  Frauds,  348 
sale  of,  on  dissolution,  555,  557 
See  Cost-Book  Mining  Company 

MINE  OWNERS, 

power  of,  to  draw  bills  in  name  of  firm,  130 

MINING  COMPANY, 

directors  of,  advancing  money  to  work  mine,  382 
whether  dissolved  by  bankruptcy  of  one  member,  649 

MINORITY, 

always  entitled  to  be  heard,  315 
when  bound  by  majority,  313 
when  not,  313 

bound  by  account  stated  by  majority,  512,  note  (d) 
See,  also,  Majority 

MISAPPLICATION  OF  MONEY, 

injunction  to  restrain,  540,  541.     See  Injunction 
by  one  partner,  liability  of  firm  for,  150  et  scq. 
See  Breach  of  Trust 


880  INDEX. 

[The  paging  refer9  to  the  [*]  pages.  ] 
MISCONDUCT, 

losses  incurred  by,  how  borne,  386,  387 
loss  of  right  to  contribution  by,  370,  386,  387 
a  bar  to  injunction  at  the  instance  of  the  guilty  party,  544 
of  partner,  a  ground  for  dissolution,  580 
not  at  his  instance,  582 
time  from  which  dissolution  dates,  582 
degree  of,  581 

with  a  view  to  compel  co-partners  to  dissolve,  497,^575,  579 
injunction  in  cases  of,  543 
receiver  in  cases  of,  550 
apportionment  of  premium  in  cases  of,  68 
See,  also,  Injunction  ;  Receiver 

MISJOINDER  OF  PARTIES.     See  Action  ;  Parties 

MISNOMER.     See  MISTAKE  ;  NAME 
MISREPRESENTATIONS, 

actions  for,  163,  479  etseq.,  481 

what  will  support,  163,  480,  481 
must  be  material,  481 
have  been  relied  on,  481 
known  to  party  making  it,  481 
liability  of  partners  for,  162  et  seq. 
rescission  of  contract  for,  479,  482 
as  to  nature  of  business,  166 

of  authority,  481,  note  {p) 
See,  also,  Fraud  ;  Liability  ;  Rescission  of  Contract 

MISTAKE, 

reopening  accounts  for,  513 
in  proof  in  bankruptcy  corrected,  694 

in  name  of  firm,  consequences  of,  as  regards  bill  of  exchange,  &c,  185 

in  other  respects,  115 
MONEY, 

had  and  received,  action  for,  by  one  co-owner,    against  another,  59, 

note  (e) 
agreements  as  to  drawing,  418 

lent,  action  by  one  partner  against  another  for,  565,  567.    See  Action 
power  to  borrow,  131 

effect  of  having  had  the  benefit  of,  189  et  seq.,  703 
misapplication  of, 

by  one  partner,  liability  of  firm  for,  150  et  seq. 
injunction  to  restrain,  542.     See  Injunction 
trust,  following,  162 

employment  of,  in  partnership  business,  162,  523,  606.     See  BREACH 
of  Trust  ;  Liability 

MONSTER, 

partnership  for  exhibiting,  92 

MORTGAGE, 

equitable,  may  be  created  or  extended  by  parol,  119,  715 

by  one  partner  on  behalf  of  the  firm,  139,  140 

effect  of  change  of  firm  on,  119 

judgement  on  covenant  in  effect  of,   as  regards  right  to  foreclose,  255 

note  (p) 
bond  fide,  not  an  act  of  bankruptcy,  629 

of  joint  estate  to  separate  creditors  when  an  act  of  bankruptcy,  632 
of  separate  estate  to  joint  creditors,  632 
collateral,  to  secure  share  of  profits,  36,  note  {t) 

effect  of.  as  regards  merger,  255.     See  Merger 


INDEX.  SSI 

LThe  paging  refers  to  the  [*]  pages.  ] 
MORTGAGEE, 

of  partner,  right  of  to  account,  493 

position  of,  in  the  event  of  bankruptcy,  709  et  seq. 
partner's  lien  prevails  against,  364 
of  mine,  appointment  of  receiver  against  partner  who  is,  553 
equitable,  parties  to  action  by,  461 

MORTMAIN  ACTS, 

share  of  partner  in  partnership  real  estate  within,  348 

MULTIFARIOUS, 

one  action  for  the  administration  of  the  estates  of  several  partners,  nol 
necessarily,  603,  604 

MUTUAL  CREDIT,  290,  654  et  seq. 
See  Bankruptcy  ;  Set-off 

MUTUAL  INSURANCE  COMPANIES 
when  not  partnerships,  51 

policies  must  be  in  writing,  80,  note  (a),  97,  98 
may  be  stamped  after  execution,  98,  note  (i) 

NAME 

on  doors,  bills,  &c,  evidence  of  partnership,  89 

carrying  on  business  under  a  name  not  one's  own  not  illegal,  92 

effect  of  not  preventing  use  of,  217 

of  firm,  112 

not  disclosing  partners,  effect  of  on  doctrine  of  holding  out,  45,  46 
may  be  used  in  actions,  111,  265,  458.     See  Actions 
right  of  majority  to  authorise  manager  to  sign,  314,  315 
judgment  may  be  entered  up  in,  266,  299 

how  execution  issues,  where,  300 
a  trade  mark,  114,  447 
part  of  good-will,  444.     See  Goodwill 
can  be  assigned  with  good-will,  114,  447 
registration  of,  114,  447 
right  to  use  after  sale  of  business,  440 
right  to  use  after  dissolution,  444 
continued  use  of  when  wrong,  446 
agreements  as  to,  413 

contracts  in,  who  should  sue  on,  279  et  seq. 
several  firms  with  same,  181 
bills  of  exchange  in, 

liability  of  firm  on,  180  et  seq. 
effect  of  mistakes  in,  185 
when  unimportant,  186 
of  changing,  185 
effect  of  use  of  wrong  name,  185 
liability  of  person  using  wrong  name,  185 
same  as  that  of  individual,  consequence  of,  182,  446 
partner  has  no  authority  to  bind  the  firm  by  a  name  not  its  own. 

184 
injunction  to  restrain  use  of,  granted,  when,  114,  217,  note  (7*),  446, 
539,  542 
NAMES 

Copyright  acts  do  not  apply  to,  114,  note  (y) 
NAVIGATION  LAWS, 

breach  of,  when  no  defence  to  action  for  account,  107 
NECESSITY, 

extraordinary,  power  of  partner  in  case  of,  126 
tested  by  nature  of  partnership  business,  127 
*  33  LAW   OF  PARTNERSHIP. 


882  INDEX. 

[The  paging  refers  to  the  [*]  pages.] 
NEGLIGENCE, 

loss  of  right  to  contribution  by,  378,  387 
of  servants,  liability  for,  148 
of  partners,  liability  for,  149 

NEGOTIABLE  INSTRUMENTS. 

See  Bills  of  Exchange  ;  Promissory  Notes 

NEGOTIORUM  GESTOR,  372,  note  (x) 

NET  PROFITS 

and  gross  profits,  distinction  between,  7 
See  Profits 

NEW  PARTNER, 

agreements  as  to  introduction  of,  433 

effect  of  introduction  of,  on  retired  partner's  liability,  245  et  seq.,  248 
on  creditors  rights,  239  et  seq. 
See  Incoming  Partner 

NEW  SECURITY, 

effect  of  taking,  244,  246,  253.     See  Merger 

NEWSPAPERS.     See  Advertisement 

assignment  of  share  by  co-owner  of,  364,  note  (it) 
sale  of,  account  in,  497 

injunction  against  publishing  news  in,  540,  541 
effect  of  advertisements  of  dissolution  in,  222,  223 

NEWSPAPER  PROPRIETORS, 

penalties  upon,  in  default  of  registration,  99 

NEW  YORK, 

civil  code  of,  definition  of  partnership  in,  2 

NEXT  OF  KIN.     See  Death  ;  Deceased  Partner  ;   Executors  ;  Lega- 
tee 
NOMINAL  PARTNER 

not  liable  to  creditors  to  whom  he  has  not  held  himself  out,  43 

when  to  sue  with  others,  276 

may  be  made  bankrupt,  633 

may  be  included  in  joint  adjudication,  637 

See,  also,  Holding  out  ;  Ostensible  Partner  :  Quasi-Partner- 
ship 
NOMINATION 

of  successor  in  firm,  right  of,  433,  434,  435 
See  Option 

NON-SURVIVORSHIP, 

effect  of  doctrine  of,  between  partners,  340  el  seq. 

NON-JOINDER, 

of  parties.     See  Action  ;  Parties 

NON-TRADER 

and  trader  distinction  between  in  bankruptcy,  624 

implied  power  of,  to  draw  bills,  130 

to  make  purchases,  144 
NOTES, 

issue  of,  by  bankers,  96,  note  (z) 

promissory.    See  Promissory  Notes 

NOTICE, 

of  act  of  bankruptcy,  effect  of,  on  right  to  set-off,  562 

on  dealings  with  bankrupts,  665 


INDEX.  883 

TThe  paging  refers  to  the  [*]  pages.] 

NOTICE— continued. 

of  assignment  of  debts,  shares,  &c,  necessary  to  take  them  out  of  the 
order  and  disposition  of  their  assignor,  679 
what  amounts  to,  221  et  seq. ,  428,  679 
how  to  be  given,  221 

casual  knowledge  not,  680,  note  (s) 

given  by  solvent  partner  and  his  co-partner  against  whom  a 
receiving  order  made  good,  625,  note  (x) 
by  liquidator,  625,  note  (a;) 
to  one  partner,  when  notice  to  the  firm,  141,  142,  680 
to  a  retired  partner,  143 
to  an  incoming  partner,  143 
to  director  when  notice  to  company,  680 

when  not,  680 
to   clerks  of  fraud  of  partner,  not  notice  to  the  firm,  143 
of  partnership,  effect  of  as  regards  double  proof,  748 
that  a  person  who  holds  himself  out  as  a  partner  is  not  a  partner,  effect 

of,  40 
to  quit,  may  be  given  by  one  partner  on  behalf  of  firm,  279,  562 
of  breach  of  trust,  e  fleet  of,  143 
of  want  of  authority,  effect  of,  168,  175,  176 
of  fraud  on  firm,  effect  of,  169 
that  one  partner  will  not  be  bound  by  acts  of  co-partner,  effect  of,  168,' 

175,  176' 
of  private  stipulations  of  partners,  effect  of  having,  173,  201 

of  stipulations  of  partners  limiting  their  ability,  176,  201 
determining  partner's  agency  by.  210 
to  dissolve  partnership,  425,  571 
form  of,  571 
partnership  at  will.  571 
under  articles,  423—426 
when  one  partner  is  lunatic,  425 
withdrawal  of,  426,  572 
of  dissolution  or  retirement 
necessity  of,  211,  213 

when  partner  lunatic,  213 
when  not  necessary,  215 
in  case  of  death,  211 
in  case  of  bankruptcy,  212 

in  case  of  the  retirement  of  a  dormant  partner,  212  ] 
stipulations  as  to,  426  t 

right  to  give,  214 
effect  of,  215,  680 

where  there  is  a  continual  holding  out,  216 
as  regards  acts  necessary  to  wind  up  the  partnership,  217  et  i 
as  regards  the  doctrines  of  reputed  ownership,  679 
of  expulsion,  428 

NOVATION,  239.     See  Substitution  of  Debtors 

NUDUM  PACTUM, 

sharing  profits,  not  losses,  not,  64 

abandoning  right  to  look  to  outgoing  partner  for  payment  of  a  de 
the  firm  not,  242 

NUMBER 

of  persons  who  may  be  in  partnership,  70,  101 

effect  of,  on  appointment  of  a  receiver,  549 
NURSERY  GROUNDS, 

conversion  of,  by  being  used  as  partnership  property,  333,  346 


884  INDEX. 

[The  paging  refers  to  the  [«]  pages.] 

OFFICER, 

bill  of  exchange  payable  to,  180,  note  (a) 

public,  presence  of,  in  action  for  dissolution,  not  sufficient,  462.     See 
Public  Officer 

OFFICIAL  APPOINTMENTS 
held,  by  a  firm,  114 

held  by  one  partner,  when  partnership  assets,  331 
agreements  as  to,  414 
See  Appointment 

OLD  CUSTOMERS, 

notice  of  dissolution,  how  to  be  given  to,  221,  222 

OPTION 

to  become  a  partner,  20 

position  of  person  who  has,  433 
as  regards  creditors,  20,  21 
to  purchase  share  of  partner,  423 
sale  ordered  when,  555 
when  to  be  declared,  424 
in  case  of  lunacy.  578,  note  (»») 
provision  in  articles  as  to,  424 

ORDER.     See  Judgment. 

forms  of,  in  partnership  actions,  517,  note  (n) 

when  sheriff  seizes  for  separate  debt,  362.     And  ADDENDA 
and  disposition,  679.    See  Reputed  Ownership 

ORDER  OF  DISCHARGE,  751 
effect  of,  752  et  seq. 

joint  orders,  753 
refusal  of,  753 
status  of  undischarged  bankrupt,  754 

ORIGINATING  SUMMONS, 

right  of  creditor  of  firm  to  proceed  against  estate  of  deceased  partner  by, 
598 
OSTENSIBLE  PARTNER, 

notice  of  retirement  of,  how  to  be  given,  221 

liability  of,  to  person  who  knows  he  has  no  interest  in  firm,  173,  175 
See  Holding  Out  ;  Nominal  Partner  ;  Quasi-Partnership 

OUTGOING  PARTNER, 

agreements  as  to  purchase  of  share  of,  &c,  422  et  seq. 
assignment  of  share  by,  450 
indemnity  to,  450 
right  of  to  retire  from  firm,  573 
See,  also,  Retired  Partner 

OUTLAWRY 

of  partner,  effect  of,  73 
dissolves  the  partnership,  583 
OUTLAYS  AND  ADVANCES, 

allowances  for,  381.     See,  also,  Advances  ;  Allowances  ;  Contribu- 
tion 

useless,  382 

useful  but  unauthorised,  383 

by  partner  on  account  of  debts  not  due,  382,  note  (6) 

on  separate  property  of  one  partner  and  vice  verm,  330  et  seq. 

no  allowance  for  expenses  unless  proved  to  have  been  incurred,  384 
lien  for.     See  Lien 

of  part  owners  for,  57,  60,  355 


INDEX.  885 

[The  paging  refers  to  the  [*]  pages.] 

OVERDRAWING^, 

interest  on,  when  payable,  390 
effect  of,  same  as  borrowing  money,  132 
See  Accounts 

OWNERS, 

consent  of  true,  as  regards  reputed  ownership,  682 

PARLIAMENT. 

persons  procuring  act  of,  not  partners,  23 
share  of  partner,  when  qualification  for  vote  for,  348 
persons   having  privilege    ot,  not   exempt  from  Bankruptcy  law,  624, 
note  (») 

PAROL 

evidence,  admissibility  of,  where  partnership  in  land,  51,  note  (n),  81 
contract,  by  partner,  who  may  sue  on,  177 
See  Evidence 

PARTICULAR  PARTNERSHIPS 

distinguished  from  general,  49 
shares  in,  presumptively  equal,  350 
See  Partnership 

PARSONS, 

his  definition  of  partnership,  3 

PARTIES 

to  actions.     See  Abatement  ;  Actions 

by  and  against  partners,  264  et  seq.     And  see  Addenda 
on  contracts,  273  et  seq.,  280  et  seq. 
for  torts,  278  et  seq.,  283 
in  respect  of  equitable  rights,  283 
where  a  change  in  the  firm,  284 
between  partners,  456  et  seq. 

for  an  account,  460,     See  Account 
by  and  against  the  executors  of  a  deceased  partner.  460,  461 

necessity  of  making  surviving  partners  parties,  460,  597,  612 
by  sub-partner,  460 
by  mortgagee  of  share  in  mine,  461 
by  assignee  of  partner's  share,  461 
for  a  dissolution,  460 

actions  by  some  on  behalf,  &c,  265  et  seq.,  461 
representation  by  public  officer,  461 
actions  not  seeking  dissolution,  462 

nor  division  of  assets,  463 
for  an  injunction,  461 

to  rescind  contracts  tainted  with  fraud,  482 
by  some  on  behalf  of  themselves  and  others 
when  allowable,  265,  459,  461 
identity  of  interest  requisite  in,  462 
when  trustee  in  bankruptcy  of  one  partner  a  necessary  party,  289 
no  action  defeated  for  mis-joinder  or  non-joinder,  264 

PARTITION, 

not  ordered  instead  of  sale,  555 

except  in  cases  within  the  Partition  acts,  557 
agreement  for  on  dissolution,  meaning  of,  429 

PARTNERS, 

who  may  be.     See  Capacity  of  Partners 

by  holding  out,  40  et  seq.     See  Holding  out 

who  are  and  who  are  not.  See  Analysis  of  Contents,  Bk.  I.,  and 

infra,  PARTNERSHIP 


886  INDEX. 

[The  paging  refers  to  the  [*]  pages.  ] 
PARTNERS— continued. 

liabilities  of,  to  creditors.    See  Analysis  of  Contents,  Bk.  II.,  and 

Bk.  IV.,  c.  2  and  3,  and  Liabilities 
mutual  rights  and  duties  of.     See  Analysis  of  Contents,  Bk.  III.  and 

Bk.  IV.,  c.  2  and  3 
rights  and  liabilities  of,  in  the  event  of  a  dissolution.     See  Analysis  of 

Contents,  Bk.  IV.,  c.  1,2,  and  3 
bankruptcy  of.     See  Bk.  IV.,  c.  4.     See  Bankrupt  Partner  ;  Bank- 
ruptcy 
deceased.    See  Deceased  Partners 
dormant.    See  Dormant  Partners 
incoming.     See  Incoming  Partners 
infant.     See  Infant 
lunatic.     See  Lunatic  and  Lunacy 
nominal.     See  Nominal  Partners 
ostensible.     See  Ostensible  Partners 
outgoing.     See  Outgoing  and  Retired  Partner 
retired.     See  Retired  Partner 
promoters  of  companies  not,  23,  24 
servants,  when,  13 

rights  of,  depend  on  agreement  and  on  conduct,  10,  12,  408 
members  of  mutual  insurance  societies  not,  51 
co-owners,  difference  between  and,  52 
not  sureties  of  firm.  111 
both  principals  and  agents,  111 
disabilities  of,  116,  117,  624 
liability  of,  for  acts  of  co-partner  before  execution  of  articles,  202 

before  joining  firm,  202 
special  agreements  between.     See  Articles  of  Partnership;  Implied 

Powers 
dutiesof,  towards  each  other,  not  to  be  all  found  in  partnership  articles, 406 
extent  of  liability  at  common  law,  202 
high  standard  of  honour  to  be  observed  by,  303.     See  Fraud  ;  Good 

Faith  ;  Honour 
actions  by  and  against.     See  Actions 
petition  in  bankruptcy  by,  635.     See  Bankruptcy 
proof  between,  in  bankruptcy 

against  joint  estate,  721 

against  separate  estate,  737 
execution  against 

for  debt  of  firm,  298 

for  separate  debts,  356 
See  Execution 
property  of,  322  et  seq.     See  Bk.  III.  c.  4,  and  Assets  ;  Property 

application  of  doctrines  of  reputed  ownership  to,  683.     See  Reputed 
Ownership 
right  of,  to  dissolve  partnership.     See  Bk.  IV.  c.  1 ;  and  Dissolution 
lien  of,  351.     See  Lien 
shares  of.     See  Bk.  III.  c.  5,  and  Shares 
option  to  become,  20.     See  Option 
power  to  nominate,  21 
number  of  limits  to,  70,  101 

may  be  registered  as  shareholders  in  the  name  of,  112 
legal  proceedings  between.     See  Bk.  III.  c.  10 ;  Actions 

See  also,  Partnership 

PARTNERSHIP, 

meaning  of  the  term,  1 
definitions  of,  2 


INDEX.  887 

[The  paging  refers  to  the  [*]  pages.  ] 
PARTNERSHIP— continued. 

ordinary  and  extraordinary  ,4 

distinguished  from  corporations  and  companies,  4 

distinguished  from  contracts  of  loan,  15,  16,  37  et  seq.     And  Addenda    . 

not  having  gain  for  their  object,  2,  4,  note  (_t),  50 

where  agreement  unconcluded,  19 

prospective,  19  et  seq. 

clause  negativing  a,  effect  of,  11 

as  regards  third  persons,  25  et  seq.     See  Bk.  I.  c.   1,   §  2,  and  Quasi- 
Partnership 

in  profits  not  necessarily  a  partnership  in  the  assets  by  which  they  are 
made,  14,  note  (.r),  323 

what  constitutes  a,  10  et  seq.     See  Bk.  I.  c.  1. 
in  profits  and  losses,  10 
in  profits  only,  10 — 17 
evidence  of.     See  Bk.  I.  c.  4,  80  et  seq.     See  Evidence 

who  may  enter  into.  71.     See  Capacity 

consideration  for,  63.     See  Consideration 

general  nature  of,  110  et  seq.     See  Bk.  I.  c.  6 

principals  of  agencies  as  applied  to,  124.     See  Implied  Powers, 

capitals  of,  320.     See  Capital 

commencement  of,  22 

duration  of,  121  et  seq.  See  Bk.  I.  c.  7.  See  Duration  of  Partnership 

dissolution  of.     See  Bk.  IV.  c.  1,  and  Dissolution 

transfer  of  share  in,  363,  583.     See  Transfer  of  Shares 

retirement  of  partners  from,  573 

expulsion  of  partner  from,  574 

at  will  and  for  a  term,  121,  413 

articles  of,  406  et  seq.    See  Articles  of  Partnership 

articles  to  be  drawn  up,  22 

property  of,  322  et  seq.     See  Bk.  III.  c.  4,  and  Assets  ;  Property  ap- 
plication of  doctrines  of  reputed  ownership  to,  683.     See  Reputed 

Ownership 
nature  of  partners'  interest  in,  339.     See  Share 

general  and  particular,  49 

extent  of,  depends  on  agreement,  49 

in  particular  transactions,  presumption  of  equality  of  shares  in,  350 

management  or  affairs  of,  301  et  seq. 

accounts,  396  et  seq.     See  Accounts 

contracts  ot.     See  Contracts 

rescission  of,  432  et  seq.     See  Rescission 

specific  performance  of,  475.     See  Specific  Performance 

actions  on.     See  Actions 

agreements  for  deed  of,  411.     See  Agreement 

illegal,  91.     See  Bk.  I.  c.  5 

partnerships  with  common  partners.     See  Connected  Firms 

sub-partnership,  48 

compared  with  co-ownership,  52  et  seq. 

premiums  paid  for,  64.     See  Premiums 

books  of.     See  Books 

induced  by  fraud,  482.     See  Fraud 
proof  in  respect  of,  739 

PART  OWNERS, 

not  partners,  52  et  seq. 
lien  of,  56,  60,  355 
not  each  other's  agents,  124,  note  (a) 
admissions  of,  128,  note  (/) 
See  Co-owners 


bb»  INDEX. 

[The  paging  refers  to  the  [*]  pages.] 

PART  PAYMENT.     See  Payment 

effect  of,  as  regards  Statute  of  Limitations,  260 

by  continuing  partner,  effect  of  on  retired  partner,  263 

PART  PERFORMANCE, 

excludes  operation  of  the  Statute  of  Frauds,  81,  83 

PATENT, 

agreements  as  to,  415 
illegal  partnerships  in,  99 
co-owners  of,  62 
partnership  in  working,  49 

PAUPER, 

transfer  of  share  to,  when  valid,  365 

PAWNBROKERS, 

illegal  partnerships  between,  99 

PAYMENT, 

into  Court,  when  ordered,  505 

before  trial,  505 

after  trial,  506 

effect  of  admissions  as  regards,  505 
into  Court,  evidence  of  partnership,  90 
when  a  defence  to  an  action  for  an  account,  515 
by  one  partner,  224,  note  (n) 

when  not  allowed  as  against  the  firm,  386,  387 

effect  of,  as  regards  the  Statute  of  Limitations,  260 — 262,  597 
by  Paymaster-General  to  one  partner,  135,  note  {n)  272,  note  (e) 
by  receiver,  511 
to  one  partuer,  134 

of  debt  not  due  to  firm,  134 
to  surviving  partner  discharges  payer,  342,  note  (s) 
to  bankrupt  partners,  validity  of,  668 
to  agent  by  bill  drawn  in  his  name,  136 
to  one  of  several  trustees  no  discharge,  218,  note  (m) 
bond  fide,  when  protected,  665,  and  note  (r) 
receipt  for.  not  conclusive  evidence  of,  135 
termination  of  liability  by,  225 
imputation  of,  225  et  seq.     See  Appropriation  of  Payments 

PEACE 

declaration  of,  whether  operates  retrospectively,  72,  note  (k) 

PENAL  STATUTES 

construction  of,  95 

PENALTIES, 

reservation  of,  in  partnership  articles,  454 
action  between  partners  for  recovery  of,  563 
power  of  one  partuer  to  bind  firm  in,  143,  144 
prohibitions  under,  95 

PERSONAL  ESTATE, 

partnership  realty  when  treated  as,  343 

when  not,  347 
shares  in  partnerships  are,  343 — 346 
actions  between  partners  in  respect  of,  560 
doctrine  of  reputed  ownership,  as  regards.  678 
of  bankrupt  vests  in  trustee,  652 

PERSONAL  SERVICES, 

partner  cannot  charge  for,  380 


INDEX.  889 

[The  paging  refers  to  the  [*]  pages.] 
PERSONS 

corporation  when,  6,  note  (d) 
capable  of  being  partners,  71.     See  Capacity 
their  number,  70,  101 
their  capacity,  71    et  seq. 
meaning  of,  in  Bovill's  Act,  36 

PETITION 

for  adjudication  in  bankruptcy,  625,  633 

by  one  partner  against  another,  635,  636 
when  improper,  636 

PETITIONING  CREDITOR 
in  bankruptcy,  633 

though  joint,  when  entitled  to  rank  as  a  separate  creditor,  731,  and 

note  (it) 
election  by,  to  stand  as  a  joint  or  separate  creditor,  747 
where  public  officer,  633,  note  («) 
company,  633 

PHYSICIANS, 

partnership  between  unqualified,  98 

PLACE, 

of  business  should  be  stated  in  the  articles,  412 
right  of  majority  to  choose,  315 

PLEDGE 

of  partnership  goods  for  private  debt,  172 
power  of  one  partner  to  bind  firm  by,  139 

after  dissolution,  140,  note  (c),  218.  219 

redemption  of,  140 

POLICIES  OF  INSURANCE, 

not  within  doctrines  of  reputed  ownership,  678 
See.  also,  Marine  Insurance 

POLLOCK, 

his  definition  of  partnership,  3 

POSSESSION,     See  Reputed  Ownership 

POTHIER, 

his  definitions  of  partnership,  3 

POWERS 

conferred  by  articles  of  partnership,  must  be  construed  with  reference  to 

object  of  firm,  406,  407 
of  majorities,  313.     See  Majorities 
of  partners,  124.     See  Implied  Powers 
of  expulsion,  574 

exercise  of,  408,  426  et  seq. 
of  management,  301 
to  nominate  partner,  21,  434 
agreements  as  to,  418 
of  attorney 

construction  of,  130,  and  see  Harper  v.  Godsell,  L.  R.  5  Q.  B.  422 

PRACTICE.     See  Actions  ;  Judicial  Proceedings 
of  partners,  importance  of,  408,  409 

PRECEDENTS 

of  orders  for  account,  516,  517,  note  (n) 


890  INDEX. 

[The  paging  refers  to  the  [*]  pages.] 
PRE-EMPTION, 

clauses  giving  rights  of,  423 

when  the  partnership  is  continued  after  expiration  of  the  term, 
410,  411 

PREMIUMS, 

action  for,  where  agreement  to  become  partners  broken,  559 
agreements  as  to,  in  partnership  articles,  413 
apportionment  of,  64 — 69 
recovery  back  of,  64  et  seq. 
in  cases  of  fraud,  64 
in  cases  of  illegality,  102 
where  consideration  has  tailed,  65 

where  partnership  ceases  sooner  than  was  expected,  65 
in  event  of  bankruptcy,  67 
lunacy,  67 
death,  67 
disagreements,  68 
misconduct,  68 

what  sufficient.  68 
where  neither  party  is  to  blame,  65 

where  no  time  for  continuance  of  partnership  was  fixed,  66 
where  for  a  term,  66 

where  a  partnership  was  only  contemplated,  727 
where  agreement  made  on  dissolution,  66 
where  no  agreement,  67 
right  to  retain,  on  dissolution,  571,  note  (g) 
amount  to  be  returned,  68 
time  when  question  should  be  raised,  69 

PREROGATIVE 

of  crown  as  regards  forfeited  shares,  340,  583,  note  (t) 

PRESUMPTION 

of  equality  of  shares,  385 
of  equality  of  loss,  12,  403 

PRICE 

to  be  charged  by  one  partner  in  account  with  firm,  306,  309 

PRINCIPAL, 

one.  partner  holding  himself  out  as,  179,  277,  281 
not  bound  by  a  contract  known  to  be  fraudulent,  148 
right  of,  to  profits  made  by  agent  or  sub-agent,  307,  note  (r) 
bond  fide  payment  to,  by  agent  when  protected,  665,  note  (r) 
See  Agency  and  Agent 

PRINCIPAL  AND  AGENT, 
partner  both,  111 

PRIORITY, 

debts  entitled  to,  709,  and  note  (z).     See  Debts 

PRIVATE  STIPULATIONS 

of  partners,  effect  of  having  notice  of,  173,  174,  176 

PROBATE  DUTY, 

payable  in  respect  of  shares  of  partners,  347,  note  (a) 

PROCEEDINGS, 

conduct  of,  where  two  actions  of  administration,  598,  note  (n) 
stay  of,  on  bankruptcy,  709 


INDEX.  891 

[The  paging  refers  to  the  [*]  pages.  ] 

PRODUCTION  OF  DOCUMENTS,  501.     See  Books;  Discovery;  Inspection 
rules  as  to,  503 
agreement  precluding,  504 
belonging  to  persons  not  before  the  court,  503 
of  books  of  account,  404,  537 
in  constant  use,  505 
to  professional  accountants,  504 
to  agents,  505 

PROFITS, 

what  are,  7,  394 

agreement  to  share,  see  Book  I.,  c.  1 
a  test  of  partnership,  7,  12  et  seq. 
without  sharing  losses,  15  et  seq. 
in  lieu  of  salary,  13,  390 
specific  performance  of,  477 
annuities  payable  out  of,  435 

when  no  profits  are  made,  435 
annuities  in  lieu  of,  28 
salary  varying  with,  13,  22,  28,  390 
liability  incurred  by  sharing,  25  et  seq.,  604,  note  (I) 

origin  of  rule  that  those  who  share  profits  are  liable  to  losses,  26 
modern  alterations  in  the  above  rule, 

by  the  judgment  in  Cox  v.  Hickman,  30 

more  recent  decisions,  31  et  seq.     And  ADDENDA 
act  of  28  &  29  Vict.  c.  86,  35 
distinction  between  sharing, 
net  and  gross  profits,  7 
profits  and  gross  returns,  8,  17,  18,  28,  29 
profits  and  payments  varying  with  them,  29 
partnerships  in  profits,  12  et  seq. 

not  necessarily  a  partnership  in  the  assets  by  which  they  are 
made,  14,  note  \x),  328 
presumption  of  equality  of  shares  of,  and  losses,  12,  348,  385 
how  ascertained,  397 
division  of,  393 

payment  of,  out  of  capital.  394,  note  (e) 
what  divisible  as,  394 
altering  principles  of  division  of,  319 
exclusion  of  partner  from  share  of,  395 
share  of,  collaterally  secured,  36,  note  (t) 
income  tax  payable  in  respect  of  what,  394,  note  (c) 
legatee  of  share  in  partnership  entitled  to,  620 
no  apportionment  of,  621 
account  of,  401.     See  ACCOUNT 

agent  must  account  for,  305,  307,  note  (r) 
partners  must,  305  et  seq. 

when  derived  from  use  of  partnership  property,  309 
from  dealings  with  the  firm,  305 
from  connection  with  the  firm.  310 
from  competition  with  the  firm,  312,  419 
since  dissolution,  435,  521,  614  et  seq. 
where  the  capital  is  lent  at  interest,  521 
where  the  traders  are  not  trustees,  522 
where  they  are  trustees,  523 

where  some  of  the  traders  are  trustees,  523  et  seq. 
rights  of  legatee  against  executors  who  are  surviving  partners,  528, 
530,  534 
may  take  interest  at  5  per  cent,  or  profits,  531 


892  INDEX. 

[The  paging  refers  to  the  [*]  pages.] 
PROFITS— continued. 

account  of  subsequent  to  bankruptcy,  648 

when  share  of  deceased  partner  is  not  got  in,  521 
co-owners  sharing,  18,  53 
managers  sharing,  10,  13 
trustees  sharing,  523  et  seq. 

executors  of  deceased  partner  sharing,  604  et  seq.     See  EXECUTOBS 
servants  sharing,  13,  18,  390 
if  not  drawn  do  not  necessarily  bear  interest,  390 
See,  also,  Losses 

PROFITS  AND  LOSSES, 

agreement  to  share,  10 

type  of  partnership,  7,  10 

restricted  rights  under  such  agreements,  10 

clauses  negativing  partnerships  in,  effect  of,  11 
shared  alike  unless  agreement  to  the  contrary,  348,  385 
partners'  share  of,  how  ascertained,  397 

See  Profits  ;  Losses 

PROHIBITORY  CLAUSES 

in  articles  of  partnership,  419 
against  carrying  on  trade,  436  et  seq. 

PROHIBITORY  STATUTES, 
construction  of,  95 

PROMISE 

by  one  partner  to  pay  debt,  136,  261 

effect  of,  as  regards  the  Statute  of  Limitations,  261,  262,  511 
to  one  partner  to  pay  debt,  136,  note  (d) 
by  creditor  to  discharge  retired  partner,  242 
to  pay  out  of  certain  funds  only,  effect  of,  201 
by  one  partner  to  provide  for  bill  of  exchange,  139 

PROMISSORY  NOTES, 

liability  of  partners  on,  180,  187 

effect  of  form  of,  176  et  seq. 

power  of  one  partner  to  bind  firm  by,  129.     See  Implied  Powers 

authority  to  transfer,  131 

joint  and  several,  liability  on,  187 

action  on 

by  one  partner  against  another,  565 

by  partners,  274 
injunction  to  restrain  negotiation  of,  542,  note  (6) 
issue  of,  by  bankers,  96,  note 
instruments  held  to  be,  187  et  seq. 

given  by  continuing  partner,  when  binding  on  retired  partner,  213  ft  *<</. 
do  not  merge  debt,  254 
See  Bills  of  Exchange 

PROMOTERS  OF  COMPANY 

not  partners,  23,  24 

not  impliedly  liable  to  each  other  for  services,  24,  note  (q) 

observations  on  liabilities  of,  45 

extent  of  such  liabilities,  206,  207,  385 
liability  of,  for  acts  done  before  they  become  promoters,  206 
effect  of  admission  by  one  as  against  the  others,  88,  note  (o) 

PROOF 

of  partnership,  80  et  seq.     See  EVIDENCE 


INDEX.  893 

[The  paging  refers  to  the  [«]  pages.] 
PROOF  OF  DEBTS,  707  et  seq. 

in  bankruptcy,  701  et  seq.,  707  et  seq. 
liquidated,  707 
unliquidated,  when,  707 
against  executor  for  devastavit,  738  note  (j) 
against  bankrupt  partner,  does  not  preclude  creditor  from  having 

recourse  to  the  estate  of  deceased  partner,  250,  602 
by  secured  creditor,  602,  709  et  seq.,  749 
by  bankrupt  trustee,  707 
by  surety,  719 
by  joint  creditors,  720,  730 
by  separate  creditors,  728,  730 
by  partners,  721,  737 
by  firm,  707 
by  company,  707 
if  brought  up  for  less  than  their  nominal  amount,  663 
on  administration  of  estate  of  deceased  partner,  597,  598 
See  Bankruptcy 

PROPERTY 

of  partners,  322 

joint  estate,  what  is,  323 

agreement  of  partners  the  true  test,  323,  329,  414 
property  paid  for  by  the  firm,  belongs  to  firm,  323 

where  not,  325 
secret  benefits  obtained  by  one  partner,  307,  325 
ships,  324 

good  will,  327,  415,  439 

money  paid  to  one  partner  for  his  exclusive  benefit,  325 
property  acquired  after  dissolution,  326 
nature  of  partners'  interest  in,  339.     See  Shares 
devolution  of,  in  case  of  death  of  partner,  341.     See  Death 
to  what  extent  personal  estate,  343  et  seq. 
sale  of  on  dissolution,  429.     See  SALE 
separate  estate,  327 

property  used  for  partnership  purposes  not  necessarily  partner- 
ship property,  14,  note  (x),  328 
property  bought  with  the  money  of  the  firm,  329 
appointments,  331,  414 
stock  in  trade,  331 
furniture,  329 
lease,  330 

trade  secrets,  patents,  &c,  415 
houses  built  on  partnership  property,  330 
lauds  farmed  in  common,  332 

joint-tenants  partners  in  profits,  332 
devisees  of  a  trade  and  of  land  for  the  purpose  of  carrying  it  on, 

333 
devisees  of  mines,  333 

land  acquired  for  the  purposes  of  trade,  333 
conversion  of  joint  estate  into  separate  estate,  and  vice  versd,  334 
et  seq.,  697 
agreement  of  partners  sufficient  for,  334,  697 

if  executed,  337,  697 
evidence  of  such  agreement,  700 
dealings  between  one  partner  and  the  firm,  335 
change  of  property  on  change  in  firm,  336 
effect  of  fraud  on,  338,  697 
of  holding  out  on,  700 


894  INDEX. 

[The  paging  refers  to  the  [*]  pages.  ] 
PROPERTY— continued. 

effect  of  doctrine  of  reputed  ownership  on,  700 
continuance  of  lien  on,  699 
effect  of  in  administrating  estates  in  bankruptcy,  697  etseq. 
binds  creditors,  335 
trustee  in  bankruptcy,  335,  697 
belonging  to  firm,  profits  derived  by  use  of,  must  be  accounted  for 

to  the  firm,  309 
sharing  produce  of,  17,  28,  29,  53,  347 
vesting  in  trustee  of  bankrupt  partners,  644,  646  et  seq.  See  Trustee 

in  Bankruptcy 
actions  between  partners  relative  to.     See  Actions 
of  the  firm,  agreements  as  to,  414 
lien  on.     See  Lien 
use  of,  evidence  of  partnership,  90 

wrongful  employment  of,  by  trustee,  liability  for,  523  et  seq. 
See  Assets  ;  Capital 

PROSPECTIVE 

partnerships,  20,  80,  412 

PROSPECTUS 

application  of  doctrine  of  holding  out  to  persons  signing,  44 
evidence  of  partnership,  89 

PROTECTED  TRANSACTIONS 

under  the  Bankruptcy  act,  what  are,  630 

PROTEST, 

effect  of,  as  regards  laches,  469 

PRUSSIAN  CODE, 

definition  of  partnership  in,  3 

PUBLIC, 

holding  out  as  partner  to,  40  et  seq.     See  Holding  OUT 
mode  of  giving  notice  of  dissolution  to,  214,  222,  223 
See  Notice 

PUBLIC  OFFICES, 

partnership  for  sale  of,  illegal,  92 

PUBLIC  OFFICER, 

bill  of  exchange  payable  to,  180,  note  (a) 
presence  of,  in  action  for  dissolution  insufficient,  462 
company  entitled  to  sue  by,  may  petition  under  Bankruptcy  act,  633 
proof  in  bankruptcy  by,  739 
See  Action 

PUBLIC  POLICY, 

partnerships  opposed  to,  92 

PUBLISHER  AND  AUTHOR,  14    See  Author  and  Publisher 

PUFFENDORF, 

his  definition  of  partnership,  3 

PURCHASE, 

partner  may,  his  co-partners'  share,  313 
option  of,  of  co-partners'  share,  423 
how  declared,  424 
enlarging  time  for,  424 

of  share  of  partner  sold  under  nfi.  fa.,  340,  356  et  seq.     See  ESECUTION 
See,  also,  Sale  of  Shares 


INDEX.  895 

[The  paging  refers  to  the  [*]  pages.] 
PURCHASE—  continued. 
of  goods 

by  one  partner  for  firm,  144 

from  firm,  duty  to  disclose  in  case  of,  306 
for  re-sale  and  division  of  produce,  53 
See  Sale 

PURCHASER 

protected  in  case  of  bankruptcy  wben,  625,  note  (t) 
See  Purchase 

QUARRELS 

dissolution  in  case  of,  581 

inferred  from,  572 
injunction  in  cases  of,  543 

QUARRIES.     See  Mines 

who  are  partners  in,  54 

partner  in,  has  no  power  to  bind  co-partners  by  bills,  130 

QUASI-PARTNERSHIP,  25 
meaning  of,  9 
evidence  of,  83  et  seq. 
by  sharing  profits,  25 

distinction  between  sharing  profits  and  gross  returns,  28,  29 

and     payments    varying     with 
them,  29 
alteration  in  law  as  to,  by  Cox  v.  Hickman,  30  et  seq. 
by  holding  oneself  out  as  a  partner,  40  et  seq. 
effect  of  doctrine  on  deceased  partners,  605 

effect  of  knowledge  that  a  person  who  hold  himself  out  as  a  part- 
ner is  not  a  partner,  40,  41 
effect  of  fraud,  41,  42 
what  constitutes  a  holding  out,  42 
where  name  is  concealed,  42,  45 
holding-out  must  be  to  the  plaintiff,  42,  43 
authority  to  hold  out,  42,  43 
holding  out  by  retiring  partner,  45 
by  surviving  partner,  46 
by  bankrupt  partner,  212,  667,  700 
application  of  doctrine  to  inchoate  partnerships,  44 
holding-out,  a  question  of  fact,  44 
not  in  cases  of  tort,  47 

bills  of  exchange  of,  181.     See  Bills  of  Exchange 
See,  also,  Holding-out 
RACE-HORSE. 

co-owners  of,  not  partners,  14,  18,  51 
RATIFICATION, 

knowledge  essential  to,  143 
when  possible,  148,  note  [a) 
in  case  of  torts,  148 
by  firm,  of  guarantee,  138 

of  submission  to  arbitration,  129 
by  partners,  effect  of  in  settling  accounts,  387,  388 
by  infant,  76 

of  deed  executed  by  one  person  for  another,  137,  note  (i) 
REAL  ESTATE, 

actions  between  partners  relating  to,  560 
of  firm,  devolution  of,  in  case  of  death  of  partner,  341 
treated  as  personalty,  343 


896  INDEX. 

[The  paging  refers  to  the  [*]  pages.] 
RECEIPTS 

of  one  partner,  when  binding  on  firm,  135,  152,  270 

not  conclusive  evidence  of  payment,  135 

by  surviving  partner  discharges  debtor  to  firm,  342,  note  (s) 

given  to  one  partner  does  not  discharge  co-partners,  when,  239 

not  entering  a  ground  for  dissolution,  581 

RECEIVER, 

object  of  having  a,  545 

cannot  carry  on  business  unless  appointed  manager,  545.     See  Manager 

when  appointed,  545 

in  actions  not  seeking  a  dissolution,  545 
defendant  entitled  to,  before  judgment,  549 
not  refused  because  no  dissolution  is  prayed,  546 

difference  between  granting  an  injunction  and  appointing  a  receiver,547 
appointment  of,  operates  as  an  injunction,  538 
effect  of  payment  by,  on  Statute  of  Limitations,  511 
delivery  of  partnership  books  to,  554 
refused,  though  an  injunction  is  granted,  547,  note  (g),  549 

on  ground  of  laches,  469 
against  creditor  of  solvent  partner  at  suit  of  trustee  in  bankruptcy,  549 
executors,  548 
partners,  547 
non-partners,  548 

surviving  partners,  548,  note  (»»),  550 
a  mortgagee,  553 
co-owners,  59,  62 
influence  of  the  number  of  partners  on  the  appointment  of,  549 
grounds  for  the  appointment  of,  against  a  partner,  550 
agreement,  550 
misconduct,  550 
fraud,  551 
exclusion  of  co-partner,  551 

where  partner  excluded  is  also  a  mortgagee,  553 
denial  of  partnership,  552 
illegality  of  partnership,  552 
effect  of  Judicature  acts  on  appointment  of,  546 
of  mines,  53,  552 
in  case  of  lunacy,  553 
appointment  of  partner  to  be  receiver,  553 

of  solvent  partner  on  bankruptcy,  670 
order  appointing  receiver,  553 
security  to  be  given  by,  553 

interfering  with,  a  contempt  of  Court,  538,  539,  554 
right  of  arbitrator  to  appoint,  454 

appointment  of,  on  breach  of  agreement  as  to  getting  in  debts,  448 
action  by,  for  recovery  of  money  to  be  distributed  by  him,  569,  note  (wi) 
execution  on  judgment  where  a,  300,  note  (e),  359 

RECEIVING  ORDER, 
petition  for,  625 
against  the  firm,  effect  of,  637 
See  Bankruptcy 

RECITALS 

in  releases,  238 

evidence  of  partnership,  90 

REDEMPTION, 

implied  power  of  partner  to  redeem,  140 


INDEX.  89T 

[The  paging  refers  to  the  [»]  pages.] 

REDUCTION  OF  CAPITAL, 

partner  cannot  make,  without  consent,  321 
See  Capital 

REFERENCE 

to  arbitration,  agreements  for,  451.     See  Arbitration 
action  on,  451,  note  (o) 
power  of  partner  to  make,  129 
ratification  of  by  co-partners,  129 
REGISTERS, 

evidence  of  partnership,  85,  90 

REGISTRATION, 

asssociations  not  requiring,  50,  note  (/),  101,  note  (t) 
of  firm  name  equivalent  to  use,  114 

as  shareholders,  112 

as  owners  of  copyright,  112 
of  deeds  of  arrangement,  756 

REIMBURSEMENT, 

right  of,  for  expenses,  371,  381 
See  Contribution;  Outlays 

RELATION  BACK 

of  the  title  of  trustee  in  bankruptcy,   663.     See  Trustee  in  Bank- 
ruptcy 
general  doctrine  of,  663  et  seq. 

as  regards  bond  fide  dealings  without  noticeof  act  of  bankruptcy,  665 
consequences  of  doctrine  of,  as  regards 
dealings  with  bankrupt  partners,  666 
dealings  with  solvent  partners,  669 
execution  creditors,  674 
in  case  of  compositions  in  bankruptcy,  755 
of  partnership  articles,  88,  412 

RELEASE, 

setting  aside,  45 

must  be  set  aside  before  account  stated  is  re-opened,  514 
a  defence  to  action  for  account,  516 
by  one  partner,  135,  145 
of  one  partner,  effect  of,  237,  241 
effect  of  recitals  in,  238 
by  removing  seal,  238 
by  arrest,  238 

by  merger  of  securities,  254,  703 
by  substitution  of  debtors,  239 

of  drawer  of  bill,  does  not  discharge  the  acceptor,  238 
in  form,  held  to  be  only  a  covenant  not  to  sue,  237 
evidence  of  partnership  by  a,  90 

difference  between,  and  assignment  as  regards  stamp  duty,  450 
Sea  Liability 

REMAINDERMAN.    See  Tenant  for  Life 

REMOVAL 

of  seal,  release  by,  238 

of  goods,  within  protecting  clauses,  681 

REMUNERATION 

by  share  of  profits,  35  et  seq.     See  Profits 
for  services,  380 

after  dissolution,  381 
of  trustee  in  bankruptcy,  694 
*  34   LAW   OF   PARTNERSHIP. 


898  INDEX. 

[The  paging  refers  to  the  [*]  pages.  } 
RENEWAL  OF  LEASE.     See  Lease 

by  one  partner,  enures  to  benefit  of  firm,  307 

KENT, 

action  for,  by  one  partner  against  another,  565 
power  of  one  partner  to  distrain  for,  137 

REPAIRS, 

liability  of  co-owners  for,  60.     And  see  Addenda 

REPRESENTATIONS 

of  one  partner,  when  binding  on  firm,  146,  162  et  seq. 

by  partner  that  debt  is  due,  effect  of  on  liability  of  firm,  260,  261 

by  one  partner  that  he  is  acting  for  himself  alone,  effect  of,  281 

by  one  partner  as  to  the  extent  of  his  authority,  165,  168,  481,  note,  ( j») 

as  to  nature  of  business,  166 

See  Fraud  ;  Misrepresentation 

REPUDIATION 

of  partnership  induced  by  fraud,  479  et  seq. 
by  infant,  75 

See  Fraud  ;  Rescission  of  Contract 

REPUTED  OWNERSHIP, 

general  doctrines  of,  676  et  seq. 

effect  of  customs  of  trade  on,  677,  note  (y) 

property  subject  to,  678 — must  be 

in  order  and  disposition,  679 
in  trade  or  business,  680 
at  time  of  bankruptcy,  681 
with  consent  of  true  owner,  681 
doctrine  of,  does  not  apply  to  bond  fide  dealings,  &c,  without  notice  of 
an  act  of  bankruptcy,  681,  682 
as  to  notice,  679 
application  of  doctrine  of,  to 
ships,  678 

choses  in  action,  678 

shares  in  companies,  debts,  policies,  &c,  assigned  without  notice, 
.  678,  679 

property  in  possession  for  lawful  purpose,  682 
or  by  virtue  of  custom  of  trade,  682 
trust  property,  683 

property  held  for  specific  purpose,  683 
partnership  property,  684 

when  a  change  in  the  firm,  685 
debts  assigned  to  continuing  partners,  685 
property  in  the  possession  of  a  surviving  partner,  687 
dormant  partners,  689 
effect  of,  on  lien,  684 

on  separate  estate  of  bankrupt  partner,  684,  732 
on  joint  estate  of  firm,  684 

RESCISSION  OF  CONTRACT 

on  the  ground  of  fraud,  generally,  163,  479  et  seq. 
in  toto  or  not  at  all,  when,  490 
where  a  third  party  intervenes,  490 
not  for  every  fraud,  479 — 481 

fraud  must  be  on  some  material  point,  481 
and  have  been  relied  on  by  the  plaintiff,  4sl 
though  plaintiff  might  have  ascertained  the  truth.  483 
loss  of  right  to  rescind,  467,  490 
bad  bargains  not  set  aside  except  for  fraud,  485 


INDEX.  899 

[The  paging  refers  to  the  [*]  pages.] 
RESCISSION  OF  CONTRACT— continued. 

of  contracts  of  partnership  on  the  ground  of  fraud 
general  right  to.  482 
for  false  representations,  482 

plaintiff  may  sue  for  dissolution  in  the  alternative,  491 
instances  of,  in  the  case  of  partners,  482,  483 
of  bargains  between  outgoing  and  continuing  partners,  484,  485 
of  bargains  between  surviving  partners  and  the  executor  of  a    deceased 

partner,  487 
of  bargains  made  on  dissolution,  484 
of  failure  of  consideration.     See  Consideration 
by  infant,  75 
indemnity  in  case  of,  484 
extent  of  indemnity,  484 

liens  on  assets  for  purchase-money  in  case  of,  485 
And  see  Fraud  ;  Contract 
RESIDENCE 

of  partners,  effect  of  on  partnership  in  the  time  of  war,  72,  73 

RESTRAINT 

of  trade,  436,  437,  and  note  (o) 

RETAINER 

of  solicitors,  as  evidence  of  partnership,  84,  note  (r) 
by  surviving  partner  executor  of  deceased,  of  balance  due  on  the  part- 
nership account,  490 

RETIRED  PARTNER, 

actions  by  and  against,  286 

liability  of,  to  creditors,  201  et  seq.,  242  et  seq.     See  Liability 
for  future  acts  of  firm,  210  et  seq. 
for  past  acts,  223 
discharge  of, 

by  agreement  with  creditors,  239 
by  notice,  210.     See  Notice 
death,  211.     See  Death 
bankruptcy,  212.     And  see  Bankruptcy 
payment,  225 
release,  237 
lapse  of  time.  257 
dealings  of  creditor  with  remaining  partners,  242  et  seq. 

and  incoming  partners,  211,  note  (a),  245,  248 
fraud  of  creditor,  249 
when  not  affected  by  notice  given  to  others,  143 
how  affected  by  doctrines  of  reputed  ownership,  685  et  seq. 
by  doctrine  of  holding  out,  45,  216 
rescission  of  agreements  made  by  and  with,  484  et  seq. 
right  of,  to  indemnity  from  the  continuing  partners,  450 

RETIREMENT 

of  partner,  agreements  as  to,  422 
effect  of,  on  liability,  212 
accounts  on,  514 

account  of  profits  made  after  where  capital  continued  in  the  firm,  521 
et  seq. 
See  Retired  Partner 
dissentient  partner  not  bound  to  retire,  317 
right  of, 

from  partnership.  573 
See  Articles  of  Partnership  ;  Rescission  of  Contract  ;   Spe- 
cific Performance 


900  INDEX. 

[The  paging  refers  to  the  [*]  pages.] 
RETROSPECTIVE 

articles,  effect  of,  88 
partnership,  412 

See  Relation  Back 

RETURN 

of  premium,  64  ei  seq.     See  Premium 
of  goods  sold  to  firm  on  credit,  144 

REVENUE  LAWS, 

breach  of,  by  one  partner,  effect  of,  149 

illesality  of  partnership  infringing,  95,  99,  note  (s) 

contribution  in  cases  of  breach  of,  378 

REVOCATION 

of  agent's  authority,  effect  of,  on  his  right  to  indemnity,  371 
of  partner's  authority,  170,  210 
of  submission  to  refer,  effect  of,  452 

RIFLE  CORPS, 

liability  of  officers  of,  for  clothing  of,  &c. ,  50,  note  (k) 

RIVALRY 

between  partner  and  firm,  309  ei  seq. 

RUTHERFORD, 

his  definition  of  partnership,  3 

SAILORS 

sharing  produce  of  voyage  not  partners,  19 

SALARY 

varying  with  profits,  13,  18,  35.     See  Wages  ;  Profits 
share  of  profits  in  lieu  of,  13,  18,  22 
partner's  right  to,  for  extra  work.  381 

SALE 

by  one  partner,  when  binding  on  firm,  146,  569 

when  actionable  by  co-partner,  568 

when  made  after  dissolution,  217,  218 
bankruptcy,  671 
by  partner  to  firm,  305  e1  seq. 

action  between  partners  for  share  of  produce  of,  568 
of  business,  effect  of,  on  vendor's  right  to  carry  on  the  business  sold, 

440,  558.     See  Goodwill 
on  dissolution 

partner's  right  to,  555 

order  for,  555 

when  dispensed  with,  556 

agreements  as  to,  556 

partition  instead  of,  when,  555,  557 

mode  of  selling,  557 

conduct  of,  558 

leave  to  bid  at,  558 

of  good  will,  558 

of  pending  contracts,  558 

valuation  of  unsaleable  appointments,  558 

directed  before  trial,  559 
of  shares  of  partners 

rights  of  purchaser,  358,  363 
causes  a  dissolution,  359,  363,  583 
under  fi fa.,  356 

may  be  by  private  contract,  358 
since  the  Judicature  acts,  361  et  seq. 


INDEX.  901 

[The  paging  refers  to  the  [*]  pages.] 
SALE — continued. 

under/,  fa.,  duty  of  sheriff,  356 
right  of  purchaser.  358 
position  of  execution  debtor,  359 
co-owners,  right  of  to,  62,  557 
agreements  as  to,  422.  423 
notice  of,  how  given.  423 

by  executors  of  deceased  partner  to  surviving  partners  593 
when  an  act  of  bankruptcy,  627  et  seq. 
See,  also,  Purchaser  ;  Transfer  of  Shares 

SAVINGS  BANKS, 

debts  owing  to,  no  priority,  709,  note  (z) 

SCHEMES 

of  arrangement,  754  el  scq. 
effect  of,  755 
registration  of,  756 

SCRIVENER, 

solicitor  not,  156 
SEAL, 

removal  of,  from  bond,  effect  of,  238 

SECRETS, 

trade,  provisions  in  articles  as  to,  415 
SECRET  BENEFITS 

obtained  by  one  partner  must  be  accounted  for  to  firm,  305  et  seq.,  325 

actions  for  account  of,  495 

SECRET  PARTNER 

what  constitutes,  27  et  seq. 
liability  of,  178 

See  Dormant  Partner 
SECRET  SERVICE  MONEY, 

no  allowance  to  partners  for,  383,  384 
SECRETARY, 

notice  to,  when  sufficient,  680,  note  (s).     See  Notice 
for  time  being,  actions  by,  458 
See  Public  Officer 
SECURED  CREDITORS, 
proof  of  debts  by, 

in  bankruptcy,  709  et  seq. 

in  respect  of  bills  secured  by  equitable  charge  on  goods,  709 

See.  also,  Bills  of  Exchange 
splitting  demands  by,  749 

cases  in  which,  can  prove  and  retain  security,  715 
in  administration  by  the  High  Court,  602 
SECURITIES 

of  firm,  effect  of  change  of  partners  on,  119 
merger  of  debt  by  taking,  254,  703,  704 

effect  of  possessing,  as  regards  the  right  to  prove  against  bankrupt  part- 
ners, 714 
as  regards  right  to  split  demands,  749 
discharge  of  retiring  partner  by  taking,  from  continuing,  244,  253 
position  of  secured  creditors  in  bankruptcy,  709  et  scq. 

in  administration  in  the  High  Court,  602 
as  to  appropriation  of,  to  interest,  720,  note  (n) 
28  &  29  Vict.  c.  86,  does  not  deprive  a  lender  of  his.  37,  38 
substitution  of,  effect  of  on  liability  of  firm,  239 


902  INDEX. 

[The  paging  refers  to  the  [*]  pages.] 
SECURITY, 

power  of  partner  to  take,  141 

to  give,  138,  139 
SEPARATE  ADJUDICATION.     See  Bankruptcy 

SEPARATE  BUSINESS, 

profits  derived  from,  305  et  seq.,  310  et  seq.,  419 

SEPARATE  CREDITORS, 

proof  by,  in  bankruptcy,  692,  728 

against  the  joint  estate,  721  et  seq. 

separate  estates,  692,  729 
becoming  joint,  704  et  seq. 
rights  of,  against  estate  of  deceased  partner,  610  et  seq. 

SEPARATE  DEBTS, 
what  are,  702 

bills  given  for,  171.     See  Bills  of  Exchange 
execution  against  partners  for.  356.     See  Execution 
proof  and  payment  of.     See  Bankruptcy,  Deceased  Partner 
effect  of  partner  paying  with  money  of  the  firm,  171 
mortgage  of  joint  estate  to  secure,  when  an  act  of  bankruptcy,  631 
cannot  be  set  off  against  joint  debts,  291  et  seq. 
See  Joint  and  Several 

SEPARATE  DIVIDENDS, 

declaration  of,  in  bankruptcy,  693 

SEPARATE  ESTATE, 

what  is,  322,  327,  697.     See  Property 

property  used  for  partnership  purposes  may  be,  328 

property  bought  with  money  of  firm,  329 

stock  in  trade,  329 

houses  built  on  partnership  property,  330 

trade  secrets,  patents,  &c.,  415 

appointments,  331,  414 

land,  331,  332,  333 

conversion  of,  into  joint,  334,  697 

effect  of  doctrine  of,  reputed  ownership  on,  684 

distinct  account  of,  to  be  kept  in  bankruptcy,  693 

consolidation  of,  with  joint  estate,  695 

proof  against,  729 

where  firms,  with  common  partners,  693 

by  joint  and  separate  creditors,  729,  730 

by  partner  in  administration  action,  599 
distribution  of  surplus  of,  730 
caunot  be  treated  as  joint  estate  because  in  the  order  and  disposition  of 

the  firm,  686,  732 
mortgage  of,  to  joint  creditors  invalid,  when,  632 
costs  and  remuneration  of  trustee,  when  paid  out  of,  694 

See,  also,  Bankruptcy;  Property 
of  married  women, 

liability  of,  78.  624,  note  (71),  691,  note  (6) 

rights  of,  who  have  lent  money  to  husbands  for  their  business,  730 

SERVANTS, 

power  of  one  partner  to  hire  and  dismiss,  147,  419 

liability  of  firm  for  negligence  of,  149 

right  of,  to  account,  493 

payment  of,  by  share  of  profits,  13.  390 

when  partners,  13,  28 

possession  of,  effect  of,  as  regards  reputed  ownership,  679 


INDEX.  903 

[The  paging  refers  to  the  [*]  pages.  ] 
SERVICE  OF  WRITS,  &c. 
on  firm,  266 

on  one  partner,  when  sufficient,  272 
on  foreign  firms,  266,  note  (o) 
on  lunatic  partner,  266,  note  (o) 

SERVICES, 

right  of  partners  to  compensation  for,  380.     See  Allowances 

SET-OFF 

hy  and  against  partnerships,  290 

combined  effect  of  rules  at  law  and  in  equity,  291 

effect  of  changes  in  firm  and  assignment  of  debt  on  right  of  set-off, 
292 
agreed  to  be  allowed  by  one  partner,  296 
where  there  is  a  dormant  partner,  294 
cases  where  one  partner  only  has  been  dealt  with,  295 
attempt  to  avoid,  by  suing  one  partner,  296 
against  assignee  of  debt  after  notice,  296,  note  (b) 
by  way  of  counterclaim,  what  may  be,  290 
where  there  has  been  an  assignment,  295 

legacy  to  partner  indebted  to  testator,  620 
in  bankruptcy,  654  et  seq. 

tendency  to  allow,  655 

not  allowed  where  excluded  by  agreement,  656 
right  of,  exists  independently  of  intention,  657 
only  debts  or  claims  capable  of  proof  can  be,  658 
where  bills  are  returned  dishonoured,  657 
where  the  debts  are  not  yet  due,  657 
simple  contract  debts  with  specialty,  657,  658 
damages  against  debt.  658 
where  debt  secured,  658 

the  cross  demands  must  be  money  demands,  658 
and  mutual,  659 

and  contracted  before  notice  of  an  act  of  bankruptcy,  662 
buying  up  bills  of  bankrupt  for  purposes  of,  663 
See  Bankruptcy 
joint  demands  cannot  be  set  off  against  separate  demands  or  vice  versa, 

269,  291-294,  660 
agreement  to  set  off  joint  debt  against  separate,  269,  294,  661 

where  one  partner  only  is  bankrupt,  659 
as  regards  sureties,  661 
by  and  against  surviving  partners,  290 

SETTING  ASIDE 

releases  given  by  one  partner,  145 

See,  also,  Fraud  ;  Rescission  of  Contract 

SETTLED  ACCOUNT.     See  Account  Stated 

SETTLEMENT 

of  shares  in  partnership,  434 

SHARE  IN  PARTNERSHIPS, 
nature  of  a  share,  339 

share  a  right  to  money,  339 

whether  qualifies  for  vote,  348 

transfer  of,  consent  of  all  partners  requisite  to,  363 

legacies  of,  610,  619 

mortgage  of,  48,  341,  493 

assignment  of,  583 

jus  accrescendi  inter  mercatores  locum  non  habet,  340 


904  INDEX. 

[The  paging  refers  to  the  [*]  pages.] 
SHARES  IN  PARTNERSHIP— continued. 

nature  of  shares  are  personal  estate,  343 
not  interests  in  land,  343  et  seq. 

within  the  Statute  of  Frauds,  348 
are  within  the  Mortmain  acts,  348 
how  far  goods  and  chattels,  348 
forfeiture  of  to  crown,  340 
agreements  as  to.     See  Articles  of  Partnership 
amount  of  each  partner's  share,  348  et  seq. 
presumption  in  favour  of  equality,  348 
evidence  contra,  350 
application  of  rule  to  shares  in  particular  transactions,  350 
where  one  firm  comprises  another,  351 
not  within  doctrine  of  reputed  ownership,  678 
action  by  partner  for.     See  Actions  between  Partners 
lien  on  shares.     See  Lien 

mode  of  taking  shares  in  execution.     See  Execution 
sale  of.     See  Sale 

transfer  of  does  not  get  rid  of  liability,  240.     See  TRANSFER  OF  SHARES 
forfeiture  of,  574.     See  Expulsion 
surrender  of,  573.     See  Retirement 
settled,  434 

right  of  one  partner  to  purchase  his  co-partner's,  313 
locality  of,  340,  note  (d) 

SHARES  IN  COMPANIES 

registration  of  in  name  of  firm,  112 

power  of  partner  to  take,  for  security  for  debt  to  firm,  141 

trustee  of,  right  to  indemnity  against  calls,  375 

vest  in  trustee  of  bankrupt  partner,  652 

not  within  doctrine  of  reputed  ownership,  678 

SHAREHOLDERS, 

liability  of  to  contribute  to  losses  of  company,  377 
proof  against  estate  of  by  company,  739 
bankruptcy  of,  how  far  dissolves  company,  649,  650 

SHARING  PROFITS. 

quasi-partnership  by,   25 — 30.      See  Partnership  ;  Profits  ;    Quasi- 
Partnership 

SHERIFF, 

how  to  execute  fi.  fa.    or  separate  debt  of  one  partner,  356 

action  against,  for  share  of  monej  received  by,  on  sale  of  partnership 

property,  568 
right  of  purchaser  from  to  an  account,  493 
injunction  against,  at  the  suit  of  partners,  359 
effect  of  seizure  and  sale  by,  if  followed   by  bankruptcy,  674,  675,  709, 

note  (b) 
what  can  be  seized  by,  as  share  of  partner,  340 
form  of  order  on  sale  by,  362.     See  Seton  on  Decrees,  1214,  ed.  4 

See,  also,  Execution 


SHIP 


ownership  of,  324 

registration  of,  324 

part  owners  of,  60 

liability  of,  for  acts  of  each  other,  147,  note  (y) 
when  not  entitled  to  share  profits  made  by,  470 
lien  of.  355 

profits  derived  from  use  of  partners',  belong  to  firm,  309,  310 

powers  of  one  partner  as  to,  324 


INDEX  905 

[The  paging  refers  to  the  [*]  pages.  ] 
SHIP — continued. 

application  of  doctrines  of  reputed  ownership  to,  678 
transfers  of  shares  in,  366 

managing  owner  of,  right  of  to  commission,  380,  note  (m) 
injunction  to  restrain  sailing  of,  Miles  v.  Thomas,  9  Sim.  606 

SHIP'S  HUSBAND, 

partner  acting  as,  for  firm,  380,  note  (m) 

SLANDER, 

injunction  to  restrain,  542,  note  (e) 

SLANDER   OF  TITLE 

to  trade  marks,  595,  note  (e) 

SMUGGLERS, 

partnership  between,  93 

cannot  maintain  action  for  smuggled  goods  sold,  103 

SOCIETIES, 

friendly,  not  partnerships,  50 
not  having  gain  for  their  object,  50 
in  which  each  member  acts  for  himself,  51 
See  Partnership 

SOLICITING 

old  customers,  right  of  retiring  partner  to,  440,  and  note  (g\     SeeGooD^ 

WILL 

SOLICITORS, 

are  not  scriveners,  156 

not  part  of  their  ordinary  business  to  receive  money  for  investment  151. 

note  (u),  156 
clerk  may  be  articled  to  two  partners,  Be  Holland,  L.  R.,  7  Q.  B.   297 
evidence  of,  against  their  clients,  84,  note  (p) 
summary  jurisdiction  over  partners  who  are,  152,  note  (y) 
partnership  between 

when  jointly  retained,  49 

when  illegal,  100 

proof  of,  84 

in  particular  transactions  only,  478 

lien  of,  effect  of  change  in  firm  on,  120 

dissolution  of 

agreements  as  to  clients'  papers  on,  438 
effect  of  on  client's  papers,  120,  438 

in  the  case  of  dissolution  by  bankruptcy,  669 
liability  of,  for  each  others'  acts,  163.     And  Addenda 
with  respect  to  bills,  130 

misapplication  of  money,  151  et  seq. 
partner  in  firm  of,  no  authority  to  borrow,  132 

SOLVENCY 

guarantees  as  to,  when  required  to  be  written,  138,  165 
SOLVENT  PARTNERS, 

proof  by,  against  bankrupt  co-partners,  721,  738,  740 

actions  by,  288,  289 

trustee  of  bankrupt  partner  must  be  joined  with,  when,  289   670 

entitled  to  wind  up  business  of  the  firm,  669 

may  sue  on  contracts  without  joining  bankrupt,  289,  670 

may  sell  partnership  goods,  671 

validity  of  acts  of,  not  dependent  on  absence  of  notice  of  bankruptcy  694 
See  Bankruptcy 


906  INDEX. 

[The  paging  refers  to  the  [*]  pages.] 
SOME  ON  BEHALF 

of  themselves  and  others,  461.     See  Pakties 

SPECIAL  AND  GENERAL 
partnerships,  49 

SPECIALTY  DEBTS, 

whether  created  by  covenant  to  he  true  and  just,  418,  419 
may  be  set  off  against  simple  contract  debts,  658 
not  entitled  to  priority,  709 

SPECIFIC  PERFORMANCE  OF  AGREEMENTS,  475  et  seq. 
lor  partnerships,  475 
for  an  account,  477 
in  partnership  articles,  &c,  478 
to  take  share  at  valuation,  432,  479 
not  to  carry  on  business,  478 
as  to  granting  an  annuity,  479 
not  to  divulge  secret,  479 
as  to  sale  of  share,  479 
as  to  custody  of  partnership  books,  479 
as  to  collecting  debts,  448,  479 
to  refer  to  arbitration,  451 
for  a  lease  after  term  has  expired,  476 
to  share  profits,  477 
laches  of  plaintiff,  a  bar  to,  467 

SPIRITUAL  PERSONS, 

disabilities  of,  71,  note  (e) 
may  be  partners,  71 

SPLITTING  DEMAND 

by  creditor  of  bankrupt  partners,  749,  750.     See  Proof  of  Debts 

STAKEHOLDER, 

illegality  set  up  by,  106,  107 

STAMP 

on  advertisements  of  dissolution,  when  necessary,  223 

on  assignment  by  out-going  partner  to  continuing  partner,  450t 

on  assignment  of  good-will,  439,  note  («) 

on  release,  450 

STATED  ACCOUNT.     See  Account  Stated 

STATEMENTS.     See  Representations  ;  Misrepresentations  ;  Fraud 

STATUTE  OF  FRAUDS, 

effect  of,  on  guarantee  by  one  partner,  138 

on  contracts  of  partnership,  80 
share  in  cost-book  mining  company  not  within,  348 

STATUTES 

limiting  number  of  partners.  70,  K»l 
regulating  trades.  95,  note  (a;) 
penal  and  prohibitory,  95 

STATUTES  OF  LIMITATION.     See  Limitations,  Statutes  of 

STAYING  PROCEEDINGS 

at  instance  of  one  partner,  271 
power  of  Court  of,  under  Bankruptcy  act,  709 
See  Injunction 

STEALING, 

indictment  for,  by  surviving  partners,  288,  note  (z) 
property  of  firm  by  partner,  456,  457,  note  (a) 


INDEX.  907 

[The  paging  refers  to  the  [*]  pages.  ] 
STIPULATIONS 

as  regards  powers  and  conduct  of  partners,  418,  419 
of  partners  with  each  other,  effect  of  on  third  persons,  168  etseq.,  176 
against  loss,  in  partnership  agreements,  15 
See  Authority  ;  Notice 

STOCK 

wrongly  sold  by  one  partner,  liability  of  firm  for,  152,  1'53 

STOCK-BROKERS.     See  Brokers 

liability  of  firm  of,  for  money  misapplied  by  one  partner,  153,  154 

STOPPAGE  IN  TRANSITU, 

right  of,  against  trustee  in  bankruptcy,  652,  note  (o) 

STORY, 

his  definition  of  partnership,  3 

STYLE 

of  firm,  413.     See  Name 

SUBMISSION  TO  ARBITRATION.     See  ARBITRATION 

SUB-PARTNERS, 
who  are,  48 

liability  of,  to  creditors  of  principal  firm,  48 
right  of,  to  account,  493 
duration  of  partnership  between,  122 
parties  to  action  by,  460,  461 

SUB-PARTNERSHIPS,  48 
duration  of,  122 
right  to  account  in,  493 
parties  to  actions  relating  to,  460,  461 
bankruptcy  proceedings,  where  major  firm  bankrupt,  637 

SUBSCRIBERS 

to  inchoate  companies  not  partners,  24 

right  of,  to  have  back  their  money  where  company  is  illegal,  106 

actions  by,  for  the  recovery  of  their  subscriptions,  498,  499 

SUBSCRIPTION, 

recovery  of.     See  Consideration  ;  Premium 
where  partnership  illegal,  106 

SUBSEQUENT  PROFITS. 

account  of,  when  directed,  521,  614  el  seq. 

right  of  trustee  in  bankruptcy  to  account  of.  648 

right  of  executors  of  deceased  to  share  of,  592 

SUBSTITUTION 

of  debtors,  discharge  of  partner  by,  239  et  scq. 
effect  of,  in  bankruptcy,  704.  705 
can  only  be  made  with  creditor's  consent,  239,  705 

SUCCESSION  DUTY 

on  death  of  partner,  594 

SUCCESSOR 

to  business,  440  et  scq. 
appointment  of,  434 

SUICIDE, 

attempted,  no  ground  for  dissolution,  581,  note  (d) 

SUITS  IN  EQUITY.     See  Action 


908  INDEX. 

[The  paging  refers  to  the  [*]  pages.  ] 

SUPERSEDING 

adjudications  of  bankruptcy,  642,  643.     See  Bankruptcy 

SURCHARGING 

and  falsifying  accounts,  513.     See  Accounts 

SURETIES, 

partners  not,  of  firm,  111 

to  or  for  firm,  position  of,  on  change  in  firm,  117  rt  seq.,  287 
to  or  for  company,  position  of,  on  incorporation  or  amalgamation  of  com- 
pany. 118 
discharge  of,  by  doctrine  of  appropriation  of  payments,  230 

by  judgment  against  principal  debtor,  255,  256 
application  of  doctrines  of  set-ofi' to,  in  cases  of  bankruptcy,  661 
proof  by,  in  case  of  bankruptcy,  719,  745,  note  (?/i),  752 
provisions  of  Mercantile  law  amendment  act,  119 
right  of,  to  contribution  from  co-sureties,  375,  note  (I) 

SURGEONS, 

partnership  between,  unqualified,  98 

SURPLUS  ASSETS, 

action  for  share  of,  569 

distribution  of,  402.     See  Assets;  Bankruptcy 

SURRENDER 

of  partner's  share  in  property  mortgaged  held  to  include   firm's  share, 
362,  note  (o) 
See  Retirement 

SURVIVING  PARTNERS, 

rights  of,  as  against  the  executors  of  a  deceased  partner,  443,  444,  591 
to  partnership  property,  341 
to  good- will,  &c,  443,  447 
to  get  in  debts,  341,  342,  note  (s),  591 
to  mortgage  partnership  property,  341 
to  sell,  341 

as  regards  account,  613 
liabilities  of 

to  creditors  of  the  firm,  341,  591,  595 

where  the  creditors  are  proceeding  against  the  estate  of  the  de- 
ceased, 288,  460,  598 
to  the  executors  of  a  deceased  partner,  341,  592,  593 
to  the  separate  creditors,  legatees,  and  next  of  kin  of  a  deceased 
partner,  612 
when  the  assets  of  the  deceased  are  not  got  in,  614  et  seq. 
when  they  are  lent  to  the  firm,  618 
position  of,  when  also  executors,  528,  593 

account  of  subsequent  profits  against,  528 
right  of  retainer,  490 
actions  by  and  against,  288.     See  Actions;  Parties 
proper  parties  to  actions,  by  joint  creditor  to  administer  the  estate  of  a 

deceased  partner,  460,  598 
not  proper  parties  to  actions  by  separate  creditor  against  executors  of 

deceased  partner  for  an  account,  612 
may  be  joined  with  executors  of  deceased  partners  as  defendants,  when, 

603 
cannot  render  the  estate  of  their  deceased  co-partner  liable  for  what  oc- 
curs after  his  death,  46,  605 
injunction  against,  541,  542 

to  restrain  use  of  old  name,  605 


INDEX.  909 

[The  paging  refers  to  the  [*]  pages.] 

SURVIVING  PA  RTNERS— continued. 

rescission  of  contracts  between,  and  executors  of  deceased  partner.  487, 
483.  note  (n) 

application  of  doctrines  of  reputed  ownership  to  property  in  the  posses- 
sion of,  687,  689 

payment  of  debt  to,  discharges  payer,  342,  note  (s) 

agent  of  firm  must  account  to,  288,  note  (y) 

creditor  looking  for  payment  from,  does  not  lose  his  right  against  estate 
of  deceased,  250 

part  payment  of  debt  by,  effect  of  as  against  estate  of  deceased  partner, 
263 

right  of  to  charge  for  expenses  and  services,  381,  382,  note  {y) 
See  Death;  Deceased  Partner 

SURVIVORSHIP, 

of  the  doctrine  of,  between  partners,  340 

how  far  doctrine  applies,  342 

not  to  societies  not  having  gain  for  their  object,  342 

devolution  of  legal  estate  in  land,  341 

equitable  estate,  341 

choses  in  action,  341 

ordinary  chattels,  342 

shares,  343 

good-will,  342,  443,  444 
SUSPENSION 

of  bankrupt's  certificate,  752,  note  (s) 

of  proceedings.     See  Staying  Proceedings 

TEMPER, 

interference  of  the  Court  between  partners  on  the  ground  of  bad  tem- 
per, 466,  550,  580 

TENANT  FOR  LIFE, 

of  share  in  partnership.  620 

losses,  how  shared,  as  between  remainderman  and,  621 

TENANT  IN  COMMON, 

purchases  by  persons  as,  51  et  seq. 

who  are,  and  who  are  joint  tenants.  51,  note  {n) 

trustee  of  bankrupt  partner  and  solvent  partners  are,  648,  669 

remedies  between,  57  et  seq. 

action  by  one  against  the  other  for  sale  of  common  property,  568 

are  not  partners,  51 

may  be  partners  in -profits  only,  331 

of  trade-mark,  62,  note  (g) 
See  Co-Own  eks 
TENDER 

to  one  partner,  136 

TERM, 

partnerships  for  a,  121 
TERMINATION  OF  LIABILITY,  210—263 
as  to  future  acts,  210 
as  to  past  acts,  223 
by  payment,  225 
by  release,  237 

by  substitution  of  debtors  and  securities,  239 
by  lapse  of  time,  257 
by  agreement,  :.!:!! I 
by  death,  211.     See  Death 
by  bankruptcy,  212.     See  Bankruptcy 
See,  also,"  LIABILITY 


910  INDEX. 

[The  paging  refers  to  the  [*]  pages.  ]  \ 
THEATRES, 

illegal  partnerships  in,  101 

not  enforced,  102 

lessee  and  manager  of,  sharing  gross  receipts  of,  not  partners,  18 

THIBAUT, 

his  definition  of  partnership,  3 

THIRD  PARTIES, 

partnership  as  to.     See  Holding  Out  ;  Quasi-Partnerships 
possession  of,  effect  of,  as  regards  doctrine  of  reputed  ownership,  679 

TIME, 

lapse  of,  when  an  answer  to  an  action,  466 
when  a  bar  to  an  action  for  account,  508 
discharging  partners  from  liability,  257  et  seq. 
right  of  partner  to  charge  for,  380,  382,  note  (y) 
See  Laches  ;  Limitation,  Statute  of 

TITLE, 

recognition  of,  effect  of,  on  defence  of  laches,  474 
slander  of,  action  for,  595,  note  (c) 

TORTS 

actions  by  partners  for,  278 

against  partners  for,  283 
of  agent,  liability  of  principal  for,  147 
of  partner,  liability  of  firms  for,  149  et  seq. 

of  estate  of  deceased  partner  for,  595,  and  note  (c) 

of  retired  partner  for,  47,  214 
impose  joint  and  several  liabilities,  198 
when  provable  in  bankruptcy,  70S,  note  (y) 
doctrine  of  holding  out,  not  applicable  to,  47 
contribution  in  respect  ot,  377  el  seq. 
and  breaches  of  contract,  distinction  between,  198,  199 

TOWN  CLERKS, 

partnerships  between,  100,  note  (t) 

TRADE, 

covenants  in  restraint  of,  437,  note  (o) 

direction  by  testator  to  carry  on,  effect  of,  610 

customs  of,  effect  of,  on  doctrine  of  reputed  ownership,  677,  note  (y) 

on  rights  and  liabilities  of  principal,  370,  note  (/). 
372,  note  (t) 

TRADERS, 

distinction  between,  and  non-traders,  how  far  important,  624 

reputed  ownership  clause  applicable  to,  only,  625 

as  to  executions  against,  if  followed  by  bankruptcy,  674 

TRADE  MARK, 

name  of  a  firm,  114 
may  be  assigned  with  goodwill,  114 
registration  of,  114 
tenants  in  common  of,  62,  note  (g) 
part  of  goodwill,  447 

action  for  slander  of,  title  to,  595,  note  (c) 
See  Name 

TRADE  NAME.     See  Name 

TRADE  SECRETS, 

agreements  as  to,  415 


INDEX.  911 

[The  paging  refers  to  the  [*]  pages.] 
TRANSFER  OF  DEBT 

from  account  of  old  firm  to  account  of  new  firm,  effect  of.  ou  creditor  239 

et  seq.,  241,  242,  250,  253 
from  one  account  to  another,  assent  by  one  partner,  135 

TRANSFER  OF  INTEREST 

a  ground  for  dissolution,  583 
See  Transfer  ok  Share 

TRANSFER  OF  LIABILITY 

by  substituting  debtors,  239.     See  Liability 

TRANSFER  OF  SHARE 
by  co-owners,  52 
by  partners,  363.  583 

necessity  of  consent  of  partners  to,  363 

to  representatives  of  deceased  partners,  363 

effect  of,  363 

on  continuity  of  firm,  365,  366 

on  liability, '240 

as  regards  dissolution,  583 

account,  364 
where  right  to  assign,  365 
rights  of  transferee,  365 
in  mining  partnerships,  55,  366 

TREASURER 

for  time  being,  action  by,  458 
See  Public  Officer 

TREATING  CUSTOMERS, 

allowance  to  partner  for,  380,  note  (w) 

TRESPASS 

by  one  partner  against  another,  562 

TROUBLE, 

right  of  partners  to  compensation  for,  380 

executors  and  surviving  partners,  592 

TROVER 

by  assignees  of  bankrupt  partner  against  purchaser  from  solvent  part- 
ners, 671 
by  one  partner  against  another,  562,  568 

TRUE  OWNER, 

who  is,  within  the  meaning  of  the  reputed  ownership  clause,  682 
See  Reputed  Ownership 

TRUSTEE 

surviving  partner,  how  far,  521  etseq.,  528 

sharing  profits,  liabilities  of,  28,  523 

when  bankrupt,  should  prove  against  his  own  estate,  707 

authorised  to  lend  money  to  firm,  113 

unauthorised  lending  by,  liability  for.  523  et  seq. 

of  creditors'  deeds  how  far  partners,  21 

right  of,  to  indemnity,  373,  374 

where  two  funds  in  the  hands  <»('  the  trustees. 
373,  note  (e) 
application  of  doctrine  of  reputed  ownership  to,  683 
liability  of  for  profits  made  by  trust  fund.  523 
payment  of  one  of  several,  no  discharge,  21ft,  note  (m) 
See  Profits,  Account  of  ;  Breach  of  Trust 


912  INDEX. 

[The  paging  refers  to  the  ["1  pages. } 
TRUSTEE  IN  BANKRUPTCY. 
1.  Generally 
choice  of,  644 

right  of  joint  and  separate  creditors,  645 
of  joint  estate  is  also  trustee  of  separate  estate,  when,  637,644 
appointment  of  inspectors  to  protect  creditors,  645 
property  vesting  in,  646.     See  BANKRUPTCY 
may  disclaim  onerous  property,  651 
when  not  bound  by  the  acts  of  the  bankrupt,  659 
relation  back  of  title  of 
generally,  663  et  seq. 

as  regards  bond  fide  dealings  without  notice  of  act  of  banktuptcy,  664 
what  transactions  excepted,  664,  665 
consequences  of,  as  regards 

dealings  with  bankrupt  partners,  666 
dealings  with  solvent  partners,  669 
execution  creditors,  667 
set  off  against,  660.     See  Set-off 
lien  of  partners  good  against,  647 
bound  by  agreement  of  partners  as  to  their  property,  335 

and  other  like  agreements,  485 
rescission  of  agreements  by,  4s6 

has  no  right  to  property  of  which  the  bankrupt  is  trustee,  652 
cannot  sue  for  debts  owing  to  the  bankrupt  as  trustee,  652,  653 
joinder  of,  when  necessary,  289 
injunction  against,  542 

receiver  appointed  against,  or  on  application  of,  548 
remuneration  of,  694 
costs  of  expenses  of,  694 
2.   of  a  bankrupt  partner 

does  not  become  a  partner,  648,  649,  669 

becomes  tenant  in  common  with  solvent  partner,  648,  669 

takes  his  share  only,  647 

how  far  bound  by  agreement  that  share  shall  be  taken  at  a  valuation,  647 

right  of 

to  interfere  with  the  solvent  partners,  669 

to  the  partnership  books,  669 

to  bring  actions  in  the  names  of  the  solvent  partners,  670 

to  join  solvent  partners  in  suing,  289,  670 

to  wind  up  the  affairs  of  the  firm,  670 

to  an  account,  493,  648 

to  institute  a  creditor's  action  against  the  executors  of  a  deceased 

partner,  648 
to  avoid  fraudulent  preference  by  the  bankrupt,  269 
to  recover  property  sold  by  the  solvent  partners,  671 
profits  after  bankruptcy,  648 

TRUSTEE  OF  DEED  OF  ARRANGEMENT, 
appointment  of,  755 

separate  estates  as  well  as  joint  vest  in  him,  when,  755.    «See  Arrange- 
ment 
relation  back  of  title  of,  755 

TRUST  PROPERTY 

does  not  pass  to  trustee  in  bankruptcy,  652,  683 

not  affected  by  doctrine  of  reputed  ownership,  683 

following,  162 

liability  of  partners  for,  160  et  seq.     See  Breach  of  Trust 

wrongful  employment  of  by  trustee,  liability  of  for,  523  et  seq. 


INDEX.  913 

[The  paging  refers  to  the  [*]  pages.] 

TRUSTS 

to  pay  debts,  effect  of,  on  Statute  of  Limitations,  260 

when  an  act  of  bankruptcy,  631 
breach  of,  effect  of  Statute  of  Limitations  on,  260,  511 
illegal,  actions  for  execution  of,  108 

to  carry  on  business,  effect  of  as  regards  executors  and  trustees,  606 

creditors,  606,  607 
See  Breach  of  Trust  ;  Trustee 

UNAUTHORISED  ACTS, 

adoption  of,  by  firm,  388 
indemnity  in  respect  of,  371  et  seq.,  382 
liability  of  firm  for,  167  et  seq. 
effect  of  notice  of  want  of  authority,  168 
See  Ratification 

UNCERTIFICATED  BANKRUPT, 

as  to  whether  he  can  be  made  bankrupt,  639 

UNCONCLUDED  AGREEMENT, 

partnership  not  the  result  of,  19 

UNDERWRITERS, 

illegal  partnerships  between,  97,  98 

UNDISCLOSED  PRINCIPAL, 
action  by,  177 

against,  275,  note  (s) 

UNINCORPORATED  COMPANIES, 

with  transferable  shares  when  illegal,  101 
subject  to  Bankruptcy  Act,  623,  633 
effect  of  bankruptcy  of  one  member  of.  650 
proof  by  against  estate  of  shareholder,  739 

UNIVERSAL  PARTNERSHIP,  49 

UNLIMITED  LIABILITY, 

common  law  doctrines  as  to,  200  et  seq.     See  Liability  ;  Limited  Lia- 
bility 

UNQUALIFIED  AND  QUALIFIED  PERSONS 

partnerships  between.      See  Illegal  Partnership 

attornies,  100 

brokers,  97 

medical  practitioners,  98 

UNREGISTERED  PARTNERSHIPS, 

number  of  persons  who  may  be  partners  in,  70,  101 

UNSALEABLE  ASSETS, 
valuation  of,  558 

USAGE, 

of  partners,  importance  of  attending  to,  408  et  seq. 
See  Customs. 

USUAL  COURSE  OF  BUSINESS, 

limits  partner's  implied  authority  to  act  for  firm,  124  et  seq. 

USURY, 

usurious  loan  held  to  constitute  a  partnership,  15,  16 

VENDOR  AND  PURCHASER  OF  BUSINESS, 
partners  when,  28 

*  35    LAW   OF    PARTNERSHIP. 


914  INDEX. 

[The  paging  refers  to  the  [*]  page?.] 
VALUATION, 

agreements  to  take  share  at  a,  429 
no  sale  where  there  is,  555 

unless  agreement  cannot  be  carried  out,  555 
how  far  biuding  on  trustee  in  bankruptcy,  647 
when  Court  will  enforce,  432 
no  right  to  have  share  of  a  deceased  partner  at,  592 
action  by  one  partner  against  another  for  amount  of,  564 
ot  unsaleable  propery,  558 
of  shares,  426 
charges  in  respect  of,  384 
debts  incapable  of,  in  bankruptcy,  708,  751,  note  (m) 

VARIANCE 

between  name  of  firm  and  name  used  on  its  behalf,  consequence  of,  J85, 
186 
VARYING, 

articles  of  partnership,  409 

VERDICTS 

evidence  of  partnership,  90 

VINNIUS, 

his  definition  of  partnership,  4 

VOET, 

his  definition  of  partnership,  4 

VOLUNTARY  SETTLEMENTS, 

avoidance  of  by  trustee  of  bankrupt,  654 

VOLUNTEERS, 

commander  of,  liable  for  goods  ordered  by  him  for  regiment,  50 

VOTE, 

share  in  partnership,  when  a  qualification  for  parliamentary,  348 

WAGES, 

effect  of  paying,  by  a  proportion  ot  gross  returns,  18 
See  Profits  ;  Salary 
WAIVER 

of  clauses  in  partnership  articles,  &c,  408  et  seq. 

of  illegality,  104 

of  right  to  rescind  for  fraud,  &c,  490 

defence  to  an  action  for  account,  516 
WAR, 

effects  of  on  the  rights  of  partners,  72,  92 

a  cause  of  dissolution  of  partnership,  585 
WARING  EX  PARTE,  712 

application  of  rule  in,  713 

effect  of  rule  in,  713 

extent  of  application,  713 
WARRANT  OF  ATTORNEY, 

given  by  one  partner,  272 
WATSON, 

his  definition  of  partnership,  4 
WHALING  VOYAGES, 

contracts  between  persons  engaged  in,  19   note  (x) 
WIDOWS, 

agreements  as  to  annuities  to,  435 

of  deceased  partner  sharing  profits,  36 


INDEX.  915 

[The  pacing  refers  to  the  [*]  pages.  J 

"WIFE.    See  Married  Woman  ;  Hi'sband 

WILFUL  DEFAULT 

gainst  executors  of  partners.  612 
against  partners,  518.  note  («) 

WILFUL  TORTS. 

liability  of  partners  Cur,  149,  150 

WILL, 

partnerships  at, 
what  are,  121 

by  continuance  after  expiration  of  articles,  413 
actions  for  dissolution  of,  586  et  seq. 
injunction  in  cases  of,  540 
right  to  determine  at  any  time  by  notice,  571 
directing  assets  to  be  employed  in  business,  effect  of,  606  et  seq. 
in  the  event  of  bankruptcy,  722 

WINDING  UP.     See  BIc.  IV.,  DlSSOLUTlox 

ageney  of  partners  continued  for  purposes  of,  217 — 221 

final  settlement  of  accounts  on  402 

where  capital  unequal  and  losses  shared  equally,  403 

appointment  of  receivers  in  actions  for,  546  et  seq. 

matters  involved  in,  5*9 

right  of,  personal  to  solvent  partners,  670 

WITNESS, 

proof  of  partnership  by,  90 

by  solicitors  ol  the  partners,  84,  note  (r) 

WORK  AND  LABOUR, 

action  by  one  partner  against  another  for,  567 

WRITS, 

service  of,  266,  272.     See  Service 

WRITTEN  CONTRACTS.     See  Contract 

when  binding  on  partners  not  named  in,  178 

not  necessary  to  form  a  partnership,  80 

not  necessary  to  convert  joint  property  into  seperate,  or  wee  versa,  324.  334 

WRONG  DOERS, 

contribution  amongst,  377 


THE  END. 


MM 


UC  SOUTHERN  REGIONAL  LIBRARY  FACILITY 


AA    000  728189    2 


